Cloud Computing Viewpoint
Recession Survival Kit: Adopt Cloud Computing
Great Entrepreneurs Build Value and Market-Share in Down Markets
Jan. 21, 2009 09:15 AM
Tip #5: "Buckle Down, Conserve Your Cash"
Jeff Haynie, Founder & CEO of Appcelerator, has some very concise advice: "My tip -- buckle down, conserve your cash and figure out how to survive."
He unpacks his thinking in more detail, though, in his blog:
"My advice to a startup that’s not cash flow positive right now is to assume ZERO revenue for 24 months. If you can’t survive right now with the cash you have in the bank for 24 months, you have a few options you should consider right now:
- If you have access to capital, get it now. (And assume you won’t get it)
- If you have access to debt of any kind, get it now.
- If you have anyone you can live without, get rid of them now.
- If you have outstanding AR, collect it right now - offer a discount or more product to get it in the bank.
- If you’re negotiating a term sheet, sign one right now - regardless of the terms.
- If you have a business line of credit, use it now.
- Look to cut as many fixed expenses as you can right now. Get rid of anything that is monthly if you possibly can — even consider the cost of breaking obligations short-term over the long-term cost.
- Look at your business and strongly consider simplifying everything you can.
If you’re cash flow positive, well, you’re in a different position but most likely have similar things you should consider (including above):
- Cut your 12 month forecast by 50%. IF you make it up, wonderful, you’ll be that much better. Assume that your customer is going to get killed as well and will be going through similar cuts and reductions and assume you’re on that list.
- Examine your bottom 25% of your sales force and eliminate it now.
- Take the top 15% of your sales force and consider changing the incentive plan — consider lowering bases (they’re already top performers) considerably and making it up for consistency of exceeding their numbers. Consider increasing your accelerators, but try to tie your accelerators (even consider compounding them) to consistency on a quarterly basis. If you do #1, you’ll be in an even better position.
- Reserve your cash as much as you can, you’ll be in a good position to sweep up around your market and get some of your competition on the cheap in the next 18 months.
- Don’t hire anyone unless you absolutely have to for the next 3-6 months. There is going to be top talent on the street soon and you want to have reserves to pick them up opportunistically."
Tip #6: "Push Agility and Speed"
"During tough economic times," says John Crupi, CTO of JackBe, "you need to push agility and speed. Business will still spend, but they will be very prudent and buy things that reduce cost and increase speed."
Crupi offered this sensible advice as JackBe was getting set to formally announce its new Mashup Developer Community and a new version of Presto called the ‘Developer Edition’...so he definitely walks the walk as well as talks the talk, because JackBe, originators of the compelling notion that "The User is the Killer App," is all about - through its Presto product suite - increasing the effectiveness of the enterprise portal.
Tip #7: "Grow the Talent You Have"
Since we began with Jason Calacanis, let's finish by noting what the most important tips are that he gives among his ten.
My personal favorite is this one: "Grow the talent you have: When the market is down, it’s a great time to get your team educated and to the next level. Invest in training and education of your top people, because they are the ones who will lead your company through this mess."
Tip #8: "Make Your Top Ten 10% Better"
This is another great piece of Calacanis advice. He expands on it as follows:
"Look at the top ten aspects of your business and come up with a plan to make each 10% better in the next 30 days. Ask everyone in your company to make suggestions for the 10% better program and execute on the ones that will provide the most bang for the buck. Sometimes, there are things you can do today that will make something 10% better for free – you just haven’t brainstormed enough."
Tip #9: "Build Marketshare"
A nice piece of contrarian advice from Calacanis, out of the One-Man's-Celing-Is-Another-Man's-Floor Dept.: "One of the best things to do in the down market is build marketshare. Look for competitors that are going out of business and buy them or just 'steal' their clients and talent (i.e. pick them up)."
Tip #10: "Adopt Cloud Computing"
Michael Sheehan, the Technology Evangelist for GoGrid and ServePath and an avid technology pundit, is the author of our tenth tip. "Adopting Cloud Computing as a primary technology strategy will be one of the main catalysts for technology-savvy business to not only stay in business, but also be successful in the long run," he notes in a recent article. You can read the full argument here.
Some of the executives we approached offered very interesting insights into the specifics of how their own businesses were approaching the current situation of economic turmoil.
"I think everyone of these tips are excellent for any business," noted Anthony Franco, President of EffectiveUI, "but aren’t all of them things we should be doing anyhow? Recession or no recession?"
"When we look to expand our business at EffectiveUI," he continued, "we look for ways our clients can save big money or really grow revenue (or both). Why else would anyone hire us? Recession proofing your company is about making your company excellent. That way, during down times you will do more than just survive, and in bullish times will thrive."
Franco gave the following summary of Effective UI's approach:
"Our focus continues to be on attracting awesome talent and fostering a culture of teamwork, entrepreneurship and execution excellence. And then, most importantly, getting out of our own way. I’ve been astounded how successful it is when you empower everyone in a company to make a difference. What does empowerment actually mean? Giving permission to fail, as long as they fail forward. It means trusting your team has done their homework and has more context than you when making important decisions.
I’m not talking about anarchy – we all collaborate on a direction, provide insight based on our experience & education, and sometimes (but very rarely) managers have to make unpopular decisions for the benefit of the entire company. However, we’ve come to realize that success does not look like a bunch of “heroes” at the top make miraculously insightful decisions that pull the company ahead – rather success looks like a bunch of small failures where managers provide support, encouragement, some structure, and above all else – foster a great team culture."
Another executive eager to share his approach to the current times was Chris Heidelberger, CEO of Nexaweb.
Things are well at Nexaweb, Heidelberger noted. "Nothing has changed here from our prior mantra. We are building a strong independent company. Strength and independence are primarily defined by sales growth and profitability. Sales are up over 50% from prior year and (fingers crossed) we will be profitable within the next 2 quarters."
"The strategy has moved from pure play RIA to Modernization, specifically the modernization of custom enterprise application portfolios. The NXWB enterprise suite (RIA) is an important component but it doesn’t end there anymore. The business value we bring to our customers is created from the combination of consulting services for re-defining the application utilizing as much code and infrastructure as is possible, defining and implementing a reference architecture specific to the new application portfolio, and of course the NXWB platform. The break even on this proposition is 6-9 months on the hard costs and the ongoing value has proven to be 1.5-3x return per year!"