Financial Advice During These Uncertain Times

Seven months into 2020 and several months into the COVID-19 epidemic, it is now a good time to go over your business plans and forecasts. While this can be a challenging process with startups, this year, with the current situation, it can be even more of a challenge.  Of course, our team is ready and equipped to support you with resources and expertise, as may be necessary.

Here are some points for CEOs to keep in mind as you look at the rest of this year, and plan for 2021:

Cash is king

  • Make sure your cash can take you through the COVID -19 storm and last through the end of next year
  • If you have venture loans or credit lines available, consider drawing down the funds – don’t wait too long to do so. Go over all the consequences – talk about it with your investors/BOD and your CFO, so you can make the right decision for the company.
  • Continuously review new grants and benefits sponsored by the government related to Covid- 19, both in IL and internationally
  • Take a look at grants from the Israel Innovation Authority (IIA)  – even if your investors have encouraged you not to take these grants in the past, it’s worth reconsidering and having another discussion about the pros and cons.

Keep your eye on growth 

Due to COVID-19, YoY growth rates may be lower, but if you’re looking ahead to the next round of funding in the coming 18 months, it’s still important to show growth. Know your metrics so you can demonstrate growth – not just in ARR/MRR and ACV. Make sure you are aware of the cost metrics and have a very good understanding about what moves the needle and affects the figures.

As COVID-19 made us change the way we approach and sell to customers and the market, reevaluate your sales pitch and your sales process, and make sure you don’t lose new opportunities just because you can’t travel or ‘touch’ customers as you used to.

Build scenarios

  • Keep on building out scenarios and be ready to answer “What if…” questions for best and worst scenarios, as well as the status quo.
  • Look at R&D and product Gantts and timelines to better understand potential delay, and to see if you can still meet deadlines.
  • How will you cut spending if the MGA or GA is delayed or if revenues are delayed?
  • Rebuild and adjust your financial models to incorporate these new scenarios and formulate appropriate business narratives around them so you can communicate your evolving rationale to investors and stakeholders

Don’t be afraid to develop new business models

Despite the uncertainty this period brings, there are new business models that can be pursued. For example, B2D, though not new, is gaining momentum. Make sure to model any new businesses correctly and to identify the most relevant KPIs.

Take another look at operating expenses  

  • Conferences and travel won’t be back for a while, but that doesn’t mean you don’t have marketing expenses. Allocate suitable marketing budgets for online marketing, branding, marketing tools, etc.
  • Don’t sign long-term office commitments, at least until you’ve reevaluated your situation and your work from home policy. If you are a new startup, consider using shared office space.
  • If you have a large office, consider sub-leasing some of the space or look at other creative solutions.

Take care of employees who are working from home

Working from home over such a long period brings new challenges for management. Even as employees work from home, make sure not to lose the ‘personal touch’ and help ensure everyone feels they’re part of the company. Don’t be tightfisted about spending money on your employees periodically – send them gifts and show them that people are thinking of them. It matters.

Etti Hanochi, Partner and CFO & Hila Lebenthal, Head of FP&A

We are here to support you. In particular, our cash management, business plan,  financial planning & analysis and HR benchmarking and best practices specialists are available to assist you with any or all of the above.

If you have any questions, please contact us at info@nextage.com

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