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.

1. 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.

2. 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.

3. 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.

4. 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.

5. 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.

6. 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