Buckle Your Seatbelts, It's Going to Be a Bumpy Ride
Whether it's the prospect of a miserable midterm election--whatever the outcome--or a sagging economy, the signs are telling you to take care of business basics. That includes making the hard decisions you may have been avoiding.
BY HOWARD TULLMAN, GENERAL MANAGING PARTNER, G2T3V AND CHICAGO HIGH TECH INVESTORS@TULLMAN
These seem to be perilous days for almost every business owner and
especially for entrepreneurs who are finding that they are spending less time
on business building and more on business bolstering. They are concentrating
their time and energy on trying to make sure that their basic business is
stable and solid; learning that keeping a business great is more difficult than
building one in the first place. Their anxious boards and impatient investors
may be pressing them to step on the gas but not the people
charged with actually running the ranch. Slow, smart, and steady is the simple
scheme for now -- small steps, safe bets, and sure wins.
No one is shooting for the moon or betting the ranch on the next
big Idea - that's too expensive, too risky, and too hard to sell to troops who
are still shell-shocked. You have all dodged a big bullet and the team is happy
to still be employed and in business. They want to be better prepared to
survive the next wave of breakage and bad news, which feels like it's right
around the corner. The need today is for belts and suspenders, backups and Plan
Bs. Redundancy and resilience are the key concepts. There's a lot of
conversation about triage and even the most over-the-top talkers are just a
little more tentative because even they know how close they came to the edge.
Instead of new entrepreneurial energy and bold innovations,
we're currently stuck in a funk of post-pandemic lethargy, which doesn't seem
likely to be abating any time soon. The emotional recession is certainly here,
whatever the technical and economic measurements may be, and regardless of what
the politicians may tell us. We're more afraid of what the future looks like,
in terms of our political, legal, and regulatory systems, than inspired and buoyed
by what's happening all around. Nobody knows what chaos and new crises the
November elections will bring (debt ceiling threats, fake MAGA-initiated
impeachments, reductions in Social Security and other support programs) and how
that assured mess will move the stock market. Unfortunately, there's zero prospect that the direction will be
positive. The new standard is likely to be "it wasn't as bad as it could
have been," which isn't much of a bar and certainly nothing to aspire
to.
And all of that angst feeds into our businesses. A significant
number of people don't want to come back to the office, in part because they've
learned that they can be just as efficient working at home. But also
because they're more than a little afraid to face some of the economic
realities of the new normal and some of the consequences of the
"shrinkage" we're seeing in so many ways. They're mentally
"sheltering in place" and postponing their returns because they're
scared of what they're already seeing - less office space needed, fewer layers
of middle management required, continued scarcity and supply chain issues,
increased competitive and security threats from abroad. They wonder how long
they'll be welcome back at work and when the downsizing will occur.
These old timers' concerns aren't exactly misplaced.
Because this period of listless limbo is probably the best and last time to
make the personnel changes that you need to address in order to best position
the firm for the future. You don't want to keep taking out little painful
slices of the staff - the salami approach is a morale killer. As we near
the end of the year, this is the right time to get the tough decisions made. Apart from
office space that you're dying to get rid of, payroll and other personnel costs
will always be the main obstacle on the path to persistent and predictable
profitability.
In fact, just about every conversation today seems to be about
hunkering down and getting to profitability (or staying there) because it's
pretty clear that while most of your past investors are wary, tired, and
looking for outside help, there's not a lot of easy money floating around.
Valuations that were hyped during the height of the last bubble now look like
heights that the company may never again achieve. Down rounds under duress aren't good news
for anyone and they're the worst kind of pain for venture funds.
The ugly prospect of a reduction in the company's market cap
especially impacts younger employees because they see their options under water
and their pots of gold moving further and further into the future, or entirely
out of sight. There's a lot of tension and talk about alternatives, including
gigging and about making immediate job changes before the current opportunities
and demand dry up. New employees and graduates about to enter the workforce are
even more concerned and clueless about what to expect and where their careers will take them. They
think their parents and bosses have failed them, they're not interested in
fantastical lectures, and, as David Bowie said in Changes: "as
they try to change their worlds, (they're) immune to your consultations (and)
(they're) quite aware of what they're going through."
So, what can you do, as the poet Rudyard Kipling suggests, to
"keep your head when all about you are losing theirs and blaming it on
you" and to "trust yourself when all men doubt you"? My
suggestion is to do what you should have done a long time ago and attend to
those foundational things, which always seem to get lost in the rush and frenzy
of the startup process. These are straightforward tasks; they provide comfort
and reassurance to all concerned because they're serious, important, and
productive for the long haul; and they're absolutely essential to the company's
future success. Unfortunately, you and a million startups like yours, never had
the time to do more than superficially address these things. But today, for
perhaps the wrong reasons, is exactly the right time to get on the case.
The list could be quite long, but here are four areas that are
so typical and omnipresent that they don't even require further explanation.
First, clean up your code base. Second, repair and
replace your tired infrastructure before it breaks at a crucial moment. Ditch
the duct tape, extension cords, old cables, and sick servers. Third, upgrade
and enhance your cyber security - password protection, secrets management,
third party access, and vendor buffers - before you get hacked or discover that
you've been hacked. And last, take the time to better train your people and
build up their skill sets -- especially the newbies -- while there's a chance
and while you theoretically have their attention before the business starts to
really move again. Upskilling, which benefits them as well as you, is one of
the few really attractive incentives firms can offer to get their folks back
into the fold and the office.
None of this is rocket science but too many businesses overlook
these kinds of exposures and risks at some point, until it's too late.