In just a few weeks, COVID-19 has reached most countries, and changed the lives of billions of people worldwide. The impacts range from the catastrophic (illness and loss of work) to the inconvenient (shelter in place orders). This is a time of uncertainty, with conflicting information coming from official sources.
It's hard enough to run a bootstrapped startup or small business in normal times, but COVID-19 has made things 10x harder. As the CEO of Dataquest, a 30-person startup, it's been challenging for me to figure out how to support our team and customers.
In the last couple of weeks, I've spent a lot of time researching and planning, and I'm sharing what I've learned in the hope that it will help you. In this post, I'll share how to navigate COVID-19 from 3 perspectives:
- Impact on your team. Many people are having to suddenly change the ways in which they work while dealing with anxiety about the future. This includes working remotely, health impacts, and working around disruptions to the day to day.
- Business impact. Revenue in a lot of industries is dropping quickly, and being able to forecast and plan will help many businesses weather the next year or two. This includes forecasting revenue, extending runway, and adjusting strategy.
- Impact on your customers. Millions of people are impacted around the world, and your business may be a major part of their lives. Engaging with your customers will help you build trust. This includes clear communication, giving benefits to customers, and connecting with the community.
If you want to skip to a specific section, you can use these links to navigate:
- Team impact
- Financial impact
- Customer impact
Before I dive into advice, it's important to align on the parameters of the situation. Businesses dealing with COVID-19 really have two different events to navigate; the pandemic, and the recession caused by the measures to contain the spread of the pandemic.
Shelter In Place
To deal with the pandemic first, it seems likely that it will take 2-3 months of lockdown measures to halt the progress of COVID-19 in most countries. Looking at this chart, we can see that it took about 2 months in China:
The quarantine in Wuhan started on January 23rd, and will end on April 8th. This is about 2.5 months of quarantine.
This may be a bit optimistic in other countries, like the US, where cases are growing much more quickly.
As this chart shows, it's possible that some level of lockdown may stay in place through the summer. It's early, but it also seems likely that there will be some kind of resurgence in the fall, once the lockdown measures end.
However we look at it, it's best to plan for some level of travel restrictions and shelter in place orders through the end of the year.
The other point to align on is the economic impact of COVID-19.
China's GDP likely contracted 10% in the first quarter of this year, taking into account the shelter in place orders in February and March. It's unclear how quickly the recovery will happen, but businesses are still not back up to 100% now.
Goldman Sachs forecasts a large contraction in the US economy in Q2, with a gradual recovery:
After the 2008 financial crisis, the economy didn't fully recover until 2011. It's likely that recovery this time will be gradual as well. A fast recovery will be prevented by 3 factors:
- Ongoing outbreaks in other countries reducing trade
- Fear of going back to work in-person
- Ongoing shelter in place restrictions
For a small business, it's important to plan for this being a 1-2 year event. This is painful to think about, but it's better to plan for the worst case than to be too optimistic.
Now that we're hopefully aligned on the background, let's dive into the impact this will have on your team.
There are a few categories to think about:
- Transitioning to remote working
- Health impacts
- Disruptions to normal life
Millions of people are suddenly transitioning to remote work, and tools like Zoom and Slack are seeing massive surges in usage.
But working effectively remotely is about more than tools - it's also about adapting the processes you to use to coordinate your work.
When you're an in-person company, context can get shared implicitly, through casual conversations and brainstorming session.
This isn't easily possible online - you have to be explicit about context. We were a remote company before COVID-19, and we use a few strategies to overcome with this:
- We document everything across the company using Notion. Each team can access documentation from other teams.
- We send out a regular internal newsletter that contains important updates, like revenue, key metrics, and customer stories.
- We default to written communication first for sharing context. This means that we don't hold meetings just to share context - we use the meetings to reinforce context that was already communicated in writing.
- We share notes from all of our meetings with the rest of the company.
In person, it's easy to use asynchronous communication channels, like Slack, as a secondary communication channel. In a remote company, it's important to switch to async-first, where meetings are only used for critical decisions or discussion, and async is used for everything else.
It's also important to set boundaries - Slack can easily turn into a mess of notifications, which interrupt focus time for everyone.
- We setup hours where people shouldn't be responsive on Slack (this varies by timezone). This is important to ensure that people aren't always-on.
- We have a "standard meeting calendar" where certain types of meetings can only happen at certain times. This prevents people's calendars from getting clogged with meetings.
- We have agendas for all of our meetings, so it's clear why we're meeting, and what types of decisions (if any) we're making.
In-person, it's easy to tell how people are feeling, and adjust how you manage. It's much harder to do this remotely. We use a few tools to ensure that we're able to effectively manage and get feedback remotely:
- We use 15Five to structure our manager 1:1s, and do a weekly "pulse check" to see what challenges people across the company are facing.
- We do quarterly CultureAmp surveys to surface latent concerns and address them.
- We do a regular leadership team Q&A so people can share their concerns. (some of these are anonymous)
- We do check-ins at the beginning and the end of meetings to ask how people are feeling
It can be a lot harder to build connections with others in a remote environment. There are a few things we do to help with this:
- We match people across the company up weekly for social calls
- We have Slack channels for interests like books, scifi, pets, and more
- We do virtual cards and small gifts for birthdays, anniversaries, etc.
The second area to think about is health impacts on your team. This is a time when many people are sick, or are anxious about themselves or their friends and family getting sick. There are steps you can take to give your team the time and space they need to take care of themselves and their loved ones:
- PTO/time off policies
- Cancelling travel
- Expanding benefits
Time off policies
This is a time to think about expanding your PTO policy, and/or making it more flexible. People may have more unexpected days off, or need more days to recharge during this time. Consider adopting a flexible time work schedule or time off policy during the next few months.
Regulations here vary by country, but the US just passed the FFCRA, which may apply to your company. For companies under 500 employees, with certain exceptions, the Department of Labor website states that businesses need to give:
- Two weeks of paid sick leave at the employee’s regular rate of pay where the employee is unable to work because the employee is quarantined and/or experiencing COVID-19 symptoms
- Two weeks of paid sick leave at two-thirds the employee’s regular rate of pay because the employee is unable to work because of a bona fide need to care for an individual subject to quarantine, or to care for a child whose school or child care provider is closed or unavailable for reasons related to COVID-19
- Up to an additional 10 weeks of paid expanded family and medical leave at two-thirds the employee’s regular rate of pay where an employee, is unable to work due to a bona fide need for leave to care for a child whose school or child care provider is closed or unavailable for reasons related to COVID-19
Employers will be compensated for this time off, and will be able to deduct it from their payroll taxes. The mechanism is unclear, but the IRS is working on it now.
If your business has less than 50 people, it is possible to apply for an exemption, although it's currently unclear how to do that. You can read more about the FFCRA here.
Hopefully, I convinced you in the background section that there will be disruptions to daily life from COVID-19 through the end of the year. At Dataquest, we've cancelled travel through at least the end of the summer, and are reevaluating travel for the remainder of the year.
One option is to convert in-person meetings, such as offsites, into remote meetings.
Something else to consider is expanding benefits during the next few months. There are mental health and telemedicine services that might be useful to your team, such as:
In a time of anxiety, benefits like this can make a big difference. In cities around the world, people are going outside less, which can have mental health consequences:
Mental health benefits can help with the general stress of remote working and remote living.
Disruptions to normal life
Many people are having to shelter in place, and care for loved ones during the day. You can support folks in a few ways:
- Normalizing schedule changes
- Creating "safe spaces"
Normalizing schedule changes
Many parents are having to take care of their children during the day, because schools and daycares are closed. Many others are having to take care of elderly relatives.
To help these people feel supported, consider:
- Enabling people to shift their hours. Schedules may need to shift on a weekly or daily basis, especially when coordinated childcare.
- Enabling people to skip meetings. If you're documenting agendas and notes, it becomes more "normal" to skip meetings, and there is less fear of missing important context.
- Proactively checking in on team members to see how they're holding up. This can make a big difference, and can surface latent concerns.
- Normalizing disruptions during meetings. At Dataquest, many people now have kids and/or significant others popping in on calls.
Creating "safe spaces"
It can be hard to go through an anxiety-inducing time alone. Many people have concerns other than work on their minds. Consider:
- Creating a dedicated covid-19 channel in Slack for people to share how they're feeling, and tips for managing anxiety and schedule disruptions.
- Proactively sharing your own concerns can create space for others to share theirs.
Many businesses around the world have been impacted, or will be impacted, by COVID-19. This covers both this "lockdown" period, and the longer-term recession that will come about as a result.
Small business revenue has declined significantly in the past few weeks in the US:
It's hard for any business to continue when it loses a portion of revenue. It's critical to work as quickly as possible to understand and plan for the next 12 months.
In this section, I'll discuss:
- Forecasting out the revenue impacts
- Extending your runway
- Adjusting your strategy
Forecasting revenue impacts
It's critical to have good forecasting, so you can make good decisions. You're unlikely to make perfect forecasts, but try to plan out 3-4 scenarions that span a range of possibilities from worst case to best case.
To do this, you'll need to:
- Have accurate data
- Find reasonable comparisons
- Do scenario planning
Get accurate data
Ideally, you have an accountant, and use an online tool like Xero or Quickbooks to keep track of expenses.
Look at your profit and loss statements for the last 12 months. Then do the following to forecast out the next 12 months:
- Add in any future spending you've committed to, like hiring and new tool usage.
- Take into account annual raises.
- Make sure to properly attribute one-time expenses, like annual subscriptions (these will create "spiky" expenses in future months that you may not have accounted for).
Find reasonable comparisons
You need to find comparisons for both what will happen during the shelter in place, and what will happen afterwards due to the recession.
For the shelter in place part, I'd recommend researching how your sector is doing in terms of revenue in areas that have been locked down, or are sheltering in place. For example, if you're in an area where the lockdowns have just started, you can look to see what happened in areas that have been under lockdown for some time, like California, Wuhan, Spain, and Italy.
For the recession part, I'd recommend looking at how public companies in your sector did during the last recession. In our case, we're in online education, and were able to look at companies like Pluralsight, Lynda, Capella, and Rosetta Stone.
These comparisons will help you make more realistic estimates about what will happen to your revenue in the coming months.
Doing scenario planning
Once you have accurate expense and revenue data, and have a rough idea of how you'll be impacted in the next year or so, you can start to do some scenario planning.
- Based on your data, what's the "realistic" worst case? Obviously, worst case is losing all of your revenue for the next year, but that might be very improbable. What's the 5th percentile case for your revenue in the next year? (ie, there is a 95% chance your revenue will be at this level or higher in the next year)
- What's the average case for your revenue?
- For the purposes of this exercise, it's not completely necessary to plan for the best case, but you might want to do it, just in case.
Extending your runway
Once you understand your "realistic" worst case, you can plan for how to get enough runway to avoid that case. First, determine how much additional money you'll need to make it through the next 12 months in the worst case.
Then, you'll need to:
- Cut expenses
- Get loans and/or grants
- Adjust your strategy
Cutting expenses in a small company is a very hard decision. It's likely that you don't have a lot of room to cut expenses without impacting your business.
For example, we've prioritized keeping the team together, and we're cutting other expenses, like hosting costs and other tools.
You'll need to audit all of your expenses, and categorize them by how important they are to your business.
Since you already know how much you'll need to cut, you'll be able to work through this list and figure out what expenses to cut. Don't forget to cut future expenses if necessary, like hires your have planned on your roadmap.
If you have to conduct layoffs, many countries are offering enhanced unemployment benefits. In the US, several states are offering enhanced unemployment benefits. The federal government is also giving an extra $600 a week to people who are unemployed.
Get loans or grants
There are many loan options that are becoming available. In the US, the SBA is offering economic injury and disaster loans (EIDL) and enhanced 7a loans, called the paycheck protection program (PPP). You can read more about them here.
Here's the breakdown:
- Paycheck protection program loans are 100% federally guaranteed loans that require no collateral or personal guarantee. You can borrow up to 2.5x your average monthly payroll from February 15th, 2019, to June 30th, 2019. Some portion of this loan can be forgiven if you use it for payroll. Otherwise, it turns into 10 year term loan with 4% interest.
- Economic injury and disaster loans can be up to $2 million, and are to cover costs, like payroll, that now cannot be met due to COVID-19. If you apply, you can get an automatic $10k grant within 3 days.
You can apply for both programs, although you'll need to roll the grant into the PPP if you get an EIDL, then a PPP loan. You can apply for PPP loans through any SBA 7a lender, such as Wells Fargo and Chase Bank. You can apply for EIDL on the SBA website here.
Some states and cities in the US are also offering grants, which you can read about here.
Finally, some private entities are offering grants, including:
Adjust your strategy
Per Good Strategy/Bad Strategy, which I highly recommend reading, strategy is about:
- A diagnosis of a challenge or opportunity
- A guiding plan to work through the challenge
- A set of actions to work towards the plans
COVID-19 has changed many of our background assumptions about the world, and thus makes most diagnoses obselete. Strategy helps us apply the limited resources of a startup towards the places where they'll create the most leverage.
Without a correct diagnosis, you won't have an effective strategy. You may have set your annual strategy just a couple of weeks ago, but it's probably obsolete already. Think about how your customers might shift in the next year. For example, if your company does something related to delivery, will this spike in deliveries last? How might shelter in place interact with the recession to change demand?
On the other hand, if your business is related to restaurants, how long might the lockdown last? Post-lockdown, how might spending patterns change?
COVID-19 is affecting most people around the world - a group that probably includes your customers. There are many ways you can help support your customers through this time, including:
- Clear communication how your business will be impacted
- Giving benefits to people affected by COVID-19
- Helping your community connect
If your business will be impacted, it's very important to message your customers about this. People may rely on your services day to day, and being proactive in messaging will help to build trust.
One example is this message from UPS:
The world has changed a lot in the past few weeks:
- Many people have been laid off
- Many are in lockdown, and can't go outside
- The ways we all work have changed
Companies that offer tools for remote working have a lot of expertise to share in times like this. One example is this email from BambooHR:
If you have expertise that could be valuable to your customers at a time like this, sharing it will help you add value to people in what is a pretty dark time for many.
At Dataquest, we're working on extending existing scholarships for our students, and offering new scholarships to students affected by COVID-19.
Finally, if you have a customer community, don't neglect to help your customers connect to each other and share their advice and experiences. Your customers will be able to support each other in ways that you can't.
You can get through this
This is a dark time for small businesses worldwide. We have to help our teams and customers navigate this pandemic, while potentially dealing with falling revenue. To add to the stress, many governments are prioritizing helping big businesses over small businesses.
In writing this guide, I hope that sharing what's worked for me will help you through this time. Small businesses are critical to the world, and I hope that you, and your team, are able to get through this time.