Managing through crisis
Critical aspects of successfully managing a business through a crisis
Hello everyone,
I wish I were writing my first newsletter in more joyful times, but we are currently living through difficult times for many businesses. Restricted funding, soaring inflation, and bank collapses are making things challenging. It's not easy on anyone. Let me reflect on what I believe are the critical aspects of successfully managing a business through a crisis, with some examples from Rohlik Group life.
Cash Management
Effective cash management is essential during an economic crisis. It's important to clearly understand your company's financial position, monitor cash flow, and take appropriate steps to conserve cash. We run cash flow forecasts weekly at Rohlik Group, despite having a 12+ month-long runway. Having a great CFO is more important than ever, and we just hired one in January.
Agility
During an economic crisis, it's essential to be agile and responsive to changes in the market. This may involve adjusting your business model, products or services, or pricing strategies. Plan for different scenarios and be ready. We closed Series D funding with 17 days runway, but there was always a plan B and C. Work on those plans before it’s too late, and be ready to react. A “what if” and “what could kill us” discussion within leadership is vital.
Cost Management
Managing costs is essential for a business but especially critical during an economic crisis. It’s hard, it involves letting go of people you value, but the primary job of a CEO is to make sure the company prospers long-term. This may include reducing non-essential expenses or renegotiating contracts with suppliers. We cut our costs by more than EUR 10m annually recently. For example, we realised we had EUR 1m annually in non-essential travel. We looked deep and left no stone unturned. We established governance where even small expenses must be approved by someone senior, incl. myself, for large costs. We were trying to avoid death by thousand papercuts. Small expenses amounted to millions per year.
Innovation
Innovation can be a powerful tool during an economic crisis, especially with reduced team size. It can involve finding new ways to use existing resources, developing new products or services, or creating new partnerships. The company needs to find a way to innovate, especially with limited resources. Necessity and scarcity foster innovation more than anything else.
Communication
Effective communication is essential during an economic crisis. Communication should be timely, transparent, and consistent. It's critical to keep all stakeholders informed and updated on the situation and any actions being taken. This includes employees, customers, investors, and other partners. Especially employees. Setting the proper context is key. We communicated layoffs in one wave and gave everyone who remained at the company security for the next 12 months at least. People don’t perform well when they are worried that another round of layoffs is coming soon. Top performers leave in anticipation. We wanted to stop this.
Resilience
Running a business through an economic crisis requires resilience. It's essential to stay focused on the business's long-term goals and not get too caught up in short-term challenges. This may involve making difficult decisions, such as layoffs or restructuring, but staying optimistic and focused on the future is important. This is the hardest. You will be under pressure to compromise on your values. Don’t! Do everything above, but don’t compromise your values and long-term goals.
I hope this was helpful. Don’t hesitate to ask any questions; I will try to reply to everyone.
Have a great Sunday!
Tom
Hey Thomas, I'm building in the grocery delivery space with average cart size around $115 Canadian Dollars. We have had 70% biweekly retention and so far all demand has been organic. We just started ~5 months ago doing around $10k in monthly revenue.
We offer scheduled next day delivery and are trying to be a supermarket similar to Rohlik with 9,000+ SKUs. Right now we are optimizing our supply working with distributors and wholesellers. You mentioned in a Youtube interview that your focus is on affluent customers as you compete on price but its not the only axis you compete on. I'm curious since it applies to us - whats an initial gross margin that you saw that works for scaling as you proved out the business model. Was it around 20% or around 30%? I know you can go higher with private label but prior to that whats a decent margin that will cover your picking and last mile costs?
Additionally, I'm not sure how dense Czeck Republic was but we are targetting Toronto and seeing good density in our last mile drops
Great insight and valuable inspiration. Many thanks for that!
We are a really small team of 30 people and right now we are facing some kind of crisis. I am not in a management team, but I really feel the lack of communication and a lack of financial forecasting. This is my priority to push really hard to have such a things. But... I really ask myself, what should be prior. What if focusing on strategy and creative ways how to change business model would help more right now... I really do not know. I have never been in a C position, so any inspiration or advice (e.g an article or a book) would be helpful for me.
Thanks and have a great day!