Last man standing: How long can you hold out for, before your cash runs out?

Endeavor Webinar Series:

The experience of Ed Capaldi

Continuing its webinar series, aiming to shed light on different parameters of the impact of COVID-19 on businesses and society, Endeavor invited Ed Capaldi, a Strategic Advisor & Agile Business Coach supporting high-octane forward-thinking CEOs & Entrepreneurs accelerate through the chaos of a disruptive age. Ed discussed cash flow management and how to manage cash burn in times of uncertainty.

During the one-hour long webinar, Ed Capaldi shared his insights on effective ways for crisis and risk strategic planning during the COVID-19 crisis and he explained the importance of acting fast. Also, he pointed out that employers need to maintain a clear and open communication both with their employees and with their stakeholders. 

Effective Strategic Planning

According to Capaldi, “In the business world, strategy is the art & science of allocating resources whilst developing a unique offer value for customers. However, while dealing with the Coronavirus crisis, we need to stop allocating the resources to create value for customers, since resources are changing. Along with that, the customers’ perception and definition of value is also changing every day. Therefore, what we were used to doing in the past will not be helpful today. Slashing costs and dashing for cash is still valid, but the rules of the game have changed, thus causing the need for different mindsets.”

The concept of the Last Man Standing

“From a business respective” Ed explained, “the concept of the Last Man Standing means to become the most cost competitive producer of the goods and services in your market. Companies that have cash disciplines will always be one step ahead, as they always put on the side 5-10% of their income.” A good example of the concept is, according to Capaldi, resource company Vendata, a company that constantly optimizes its costs, “so that when things go really bad, for instance when the market collapses or a war breaks out, it will be in the best shape to survive.” 

As Ed pointed out, in the case of the COVID-19 crisis, the concept of the Last Man Standing refers to having saved enough money for your company to reboot and grow after the crisis: in other words, to survive. “An entrepreneur is built to jump off cliffs and build a plane as he goes down the cliff. We all know that but knowing is not really understanding. Get ready for acceleration. Because after a massive situation like this, there is growth.” he explained. “After all, the purpose of a business is to keep and create customers, no matter what the situation is. Getting a second chance will mean nothing if you haven’t taken any learnings from your first one. This crisis that we are going through is a great opportunity to look back and do some cleaning up and come out of the crisis lean and stronger.” he added. 

Crisis Management

The importance of acting in advance was also mentioned. “Try creating a 90-day plan, where you will write down all the possible things that might go wrong, so that you can take action in advance and avoid damage. At the same time, make weekly plans, something that keeps all teams alert and on track. It is also important to allow all willing team members to contribute to both the weekly and the three-month planning.” Ed explained.

“An entrepreneur is built to jump off cliffs and build a plane as he goes down the cliff.

Capaldi also shared three key points on effectively facing the crisis: 

  1. Understand what your economic engine is built on. Try to focus only on the things that you can affect, like the unit cost, instead of the ones that you have zero control of like the market, the pricing or the government’s decisions. 
  2. Understand how your value proposition is changing. In contrast to the industrial age, customers today are way more informed. They have access to the internet, which allows them to pick products and services very rapidly, and their reality is changing every day. Therefore, you should not stop monitoring changes, since along with the change of your customers’ perception of reality, their needs and preferences change as well. 
  3. Proceed to cutting costs. After realizing what will give value to your customers, you should start slashing costs, while at the same time simplifying your value proposition, your cost base. As he explained, in order for the company to have enough money to survive “You have to cut, cut deep, you have to cut fast, and you have to do it once”.  

He also advised employers to “Go back to basics and make the appropriate regulations so that things do not go bad again.” He also proposed an employee working plan consisting of three shifts: “The first shift will be on for 7 days, and will then go home for 2 weeks. When the first shift stops, the second one will come to work for 7 days, and then go away for 2 weeks. At the same time, a third shift will start. This way, there will always be people working at the office.”

Risk Management

Times are changing rather rapidly. In the last 10 years, we have moved from the industrial age to the post-industrial, digital age, that comes along with chaos, a key standard that is difficult to manage. A great example of this now with the COVID-19 crisis is that although lockdowns have been imposed on almost all strongly affected countries, we haven’t been very successful in handling the chaos. At the same time, it is well known that in the digital age, volatility, uncertainty, complexity, ambiguity (V.U.C.A.) is a standard.”

When asked what was the risk management strategy he would suggest for companies to adapt in order to get the best of the V.U.C.A model (volatility, uncertainty, complexity, ambiguity), Capaldi focused on the importance of the team. “Your team should be your first priority. V.U.C.A is all about making decisions fast, something that requires having the right people on board. Make sure to break things down into small pieces, take a breath and then do the risk assessment.” he added. 

Tracking all extra costs caused by the COVID-19 crisis, was also mentioned as a key strategy. Ed suggested that entrepreneurs keep track of these costs on their P&L, so that they are prepared to share this report with their government, and receive compensation accordingly. “Always remember that insurance companies or the government will demand certain data in order to compensate you. At the same time, having collected all data in advance, you will be first in the queue to be compensated” Ed explained. “Keeping track of what the COVID-19 crisis has cost you, is also a very helpful indicator of how you reacted and what you should repeat or avoid when the next crisis occurs” he added. 

Employee Communication

Ed also mentioned that one of the most important things an employer has to do when letting people go, is to make sure he passes the message the right way. “Explaining to laid off employees that there is no other way, the situation is bad, but you will do your best to hire them back when things get back to normal, is a good way to communicate the message. You should never forget that the first and the last day of someone at work should be their best days.” he explained.

Ed highlighted the importance of open communication both with employees and stakeholders. “Be open and transparent with your employees. Invest in your communication with all your stakeholders, be very clear about numbers and share with them your strategy.” he pointed out. 

Finally, Ed stated that success, as well as failure, for an entrepreneur is the result of all the decisions he makes; it is all up to him and has nothing to do with the market or the governance. “This is a marathon, not a race. You must never lose faith, but you have to confront the “brutal facts”. Making the impossible, possible is what the entrepreneur does.” 

You can listen to the recording of the webinar here

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