COVID 19 - Some businesses won't survive and some will thrive. What makes the difference?

After analyzing the impact and response of Chinese companies as well as looking at the current developments globally we've compiled a hands-on guide for business owners to steer through a stormy sea.

TL: DR

After reading this you will know

1. Two scenarios of how COVID-19 will impact the economy
2. What that means for your business
3. Which businesses will die? And what actions you need to take to avoid that for yours
4. How to thrive after the pandemic: get ready
5. Where to find resources and help in taking these actions

But to remain focused means not just stating what one does but also saying no to a lot of things. Thus, here's what we will not cover:

1. Tell you that your business now needs to focus on liquidity. That's obvious. However, I’ve created a simple calculator that allows you to simulate your revenue forecast in different scenarios. You may find it here.
2. That you will have to consider short-term labor (for Swiss companies at least. I don’t know the legislation in other countries. I’ve collected all the information you need and provided it here)
3. That you need to communicate effectively with your internal and external stakeholders. Emails will be too slow as a medium which is why it’s high time to switch to Slack or Microsoft teams immediately. 
4. That you should protect your employees, take on social responsibility and let them work from home. If you don’t have home-office as a given already before COVID-19 it’s high time. The science on employee productivity is very clear on this. They are more productive. See the sources yourself here: Bloom et al, 2014; Choudhury et al. 2019 

As Chris Voss says, what is worth nothing without how. Therefore, the article focuses not on meta-level analysis and theory. Its aim is to be directly applicable for the business owner or manager that thinks about how to make the best out of a bad situation. It is based on various sources from HBR, McKinsey as well as analysis directly from China as well as practical experience in leadership roles. So let's get started.

1. Two Scenarios - overviewing the playing field

Before we can get to the practical stuff however, we need to think of what even can happen. For what are we preparing exactly? We've all now read a couple of takes on the subject and it's treated as if there was only one way this is going to go. Which is wrong. We're navigating now in a field of immense uncertainty. And our actions are based on external events that we do not know yet. So we view at the current state now and then lay out some different scenarios.

1.1 The current situation

Because the situation changes almost daily, we will not discuss the specifics of the current situation. Your trusted newspaper will keep you updated on the daily events. A very, very brief summary as of 23.03.2020.

Asia: China could bring the spread of the virus almost to a halt as there are no new infections registered. The Hubei province (and some others as well) are still in lockdown mode, however.

Other countries could contain the virus already at an early stage.

Europe: The current epicentre of the pandemic.

US: Currently, 8 States are in complete lockdown

LATAM: The spread accelerates in the Latin American countries which react with strict lockdowns. 

A daily overview may be found here or here. Below you may find an overview of the current situation in Europe and the measurements taken by the national governments as of 22.03.2020.

1.2 Scenario I: Delayed recovery

Social distancing measures slow down the spread of the virus significantly and will peak in July instead of May resulting in a much flatter curve as shown below. The goal of Western countries is mitigation to avoid a collapse of the healthcare system as we saw in Italy. The tables below show the projected impact of social distancing and mitigation measures. Here for Switzerland.

And for the UK

Lockdowns and travel restrictions bring the economy to a temporary halt, resulting in a recession in Q2. Even with the epidemic becoming less severe and under control, fear amongst consumer and businesses slow down the economic recovery prolonging the recession until Q3 or Q4.

Monetary policy of lowering interest rates even further and quantitative easing have only small effects given the small room for movement as we’ve seen by the market reactions to the announcements of the FED. They had little to no positive impact. The hands of the federal banks are tied as they moved into a corner. Fiscal policy has some impact on the survival of SMEs. Global GDP 2020 is in a slight decline. 

1.3 Scenario II: Prolonged recovery

The virus spreads throughout the summer when it peaks in August in Europa and the US. Countries are forced to keep the lookdown for a prolonged period of time. Companies, especially in directly effected sectors layoff their personnel and take further actions to cut costs. Consumer sentiment hits rock bottom. This self-reinforcing downward spiral leads to an economic depression throughout 2020 and 2021 resulting not only in economic troubles but also social unrest. The fiscal and monetary policy responses cannot support the system as they proved to be insufficient to break the downward momentum.

 1.4 The likely scenario

Given that a shutdown over a long period of time is almost certain to cause severe social unrest due to the economic downturn, an increased Gini-coefficient (i.e. inequality of wealth distribution) and simply bored people (Beware of Dostoyevsky’s quote from Notes from the Underground:

 "Shower upon him every earthly blessing, drown him in bliss so that nothing but bubbles would dance on the surface of his bliss, as on a sea...and even then, every man, out of sheer ingratitude, sheer libel would play you some loathsome trick. He would even risk his cakes and would deliberately desire the most fatal rubbish, the most uneconomical absurdity, simply to introduce into all this positive rationality his fatal fantastic element...simply in order to prove to himself that men still are men and not piano keys” 

We will not focus on an even extremer scenario. If people go to the streets because they’ve been looked for 3 or 4 months, lose their jobs and simply stop carrying about the elders - “They didn’t care about climate change, why the hell should we now care about them?! We won’t die from COVID19” is a shocking statement that I’ve already heard on social media - then we have a crisis at our hands on a scale of a magnitude they pretty much no one living today has experienced. It could end up like during WWII or the Great Depression of 1929: a general scarcity of any goods, food rationing, etc. If that happens, nobody knows how to act and prepare. Giving any advice for this scenario is fruitless. 

Thus, even in Scenario two, shops will have to open again in June at the latest as the social structures will be boiling by then. The economic and in turn social costs are simply too high to risk a total collapse of the economy – even if it means that the elder people will die. It’s cruel but true.

In their study, the imperial college London estimates that we will have to go through iterative phases of strict lockdown and ease of measures until there’s a vaccine for COVID-19. The graph below illustrates this tandem. The orange line represents the number of cases that require intensive care.

Thus, what we are experiencing now, might be only the first of a couple of waves until a vaccine is found. So no matter the exact scenario, we ought to get our business prepared for further periods of lockdowns.

2.   What does that mean for my business?

2.1 Impacted industries

The below table shows the magnitude of impact for different industries. In short: The more your industry requires the physical gathering of people in a predetermined, confined space – such as restaurants, travel or event companies – the more severe the impact.

2.2 Insecurities rise

Due to the high level of uncertainty outlined earlier businesses will do two things now.

2.2.1 Cut costs

To ensure liquidity businesses will cut their costs and closely monitor their expenses. Positions such as the expenses for tools that are only nice to have will go down in the first round. The same goes for marketing expenses. Ads spend will plummet. Big corporations spent millions of dollars in branding, so they still are in the head of the people even without constant advertising. Cutting budgets to 0 for 3 months will not affect their sales in the long run.

If you are a SaaS or a marketing company, you will feel that impact immediately. Is your product not crucial for the business and can be canceled at a months’ notice? It’s gone. That project to market our event? Well, the fair is not happening anymore, so no more need for your marketing service either. In a nutshell; if your product or service is not crucial in the mind of the financial department (i.e. does it contribute to the bottom line?) then it’s gone asap. 

2.2.1       Buying decisions will take longer

Businesses will be hesitant to commit to investments. This wavering causes buying cycles to get longer and thus harder to close deals. Again, as a B2B business sales rep, you need to convince not just your counterpart but also the financial department. If Rick from marketing likes you and joins for beers after the sales meeting it means nothing if Rick is not able to sell you to the misers that tightly sit on their pockets. Unless you positively impact the P/L there is no budget for you. Period. Thus, focus on communicating the value of your solution to the guys making the decisions. Show ROI calculation. Do you help save costs? Do you bring more revenue? Showcase that.  Outgrow might be a helpful tool to show that. Here's a great example of how that can be done and combined with lead generation:

2.3 Permanent behavioural shifts of society à online is the new normal

The second big shift will be not just economical but will change the culture and our society. Digital will be the new normal even more. We now learn how to live and work for months inside our walls now. People adapt fast. And change their behavior. It’s simple: Businesses that are not present online now are not been seen. At all. This behavior will not switch back. If people find their new favorite restaurant that delivers at their door free of charge, they will stick to that, even if they can go outside again. This is not a new trend. It’s been happening for the last 20 years since the rise of the internet. But it catapults the trend fast forward. Businesses have to adjust to a new normal. A normal where offline is the exception. Not just for fashion stores in the B2C segment. This will impact B2B even more.

Conferences and are all being canceled. On one hand that will set free some budget that will help with your liquidity. On the other hand, you will not be able to have your outbound sales reps there at a booth or as attendees handing out business cards and going to networking pizza & beer events. If your sales do not work online yet, you’re in trouble. Conferences are already preparing to be streamed online. Again, this is a permanent shift to online. It will not switch back just like that. As B2B has not been forced to go online as much as B2C has, the impact is bigger in that area.  

3.   Key Actions to take

After we outlined the impacts that COVID 19 will have on businesses you might as yourself: “What does that mean for me? Now, it’s time to dive into the specifics and hands-on advice. What are the Key Objectives for Q2& Q3? 

3.1 Objectives

My very first coach in Football said that this game is very simple. We only have to score once more than our opponents. It's simple. Just not easy. The same dynamic applies in business. If your revenue is higher than your expenses, you win. Simple - not easy. Thus, to ensure liquidity to weather the storm we:

1. Manage Costs
2. Stabilize revenue

To give you a basis to estimate the impact and what it means for your cashflow I’ve created a simple scenario calculator for your revenue. You may access it here. It should give you a basis to see which area needs to be prioritized. To help you with that I’ve outlined the 4 key areas that you need to take action on to secure the survival of your business.

3.2 Focus on Sales

In short:

• Talk to your existing customers. Gain clarity on what COVID19 means for your projects.
• Have a clear process that everybody knows.: It provides focus on what, how and when to do.
• Have data on your activities. Without data, you cannot plan ahead for your liquidity
• Automate as much as you can: be efficient
• Have scrips and templates: be effective

3.2.1       Talk to your clients – personally.

The very first thing to do is to get an overview of what COVID 19 means for your revenue coming from existing clients. Are any projects on hold now? Is anything canceled or will they churn? This will help you to get your financial forecast right. Without that, financial planning will be impossible.

More importantly, however: Use that phone call to really deepen the relationship with your partner. We’re all in the same boat. A little empathy can go a long way. Take this German bakery, for example, The owner went live on Facebook and directly addressed their clients with truly heartfelt words. Watch it here. And in a moment of existential crisis for his business, he even finds ways to be a giver to the men and women out there working 24/7 in the hospitals to rescue lives.

Here's the proof: successful Chinese manufactures stated that they called their clients more often than the companies that are struggling now.

3.2.2       Sales Processes

As mentioned, Sales cycles get longer, budgets get tighter. You have to be able to sell. Does your sales team have a clear sales process that is tried and true? No guesswork, no just winging it. Templates, and structures, checklists and call scripts, automation and clear ways of measuring your sales are what you need now. So here’s how you get there:

 3.2.3       Data

Without data, you’re flying blindly. That’s always a bad idea. But caught in a storm? Good luck bringing that plane home safely. So, what do you need to track now? The basic unit economics of sales: If you want to skip ahead. Here's a template with all the numbers and how to calculate them for yourself.

What are they? Essentially, KPIs that help you answer 3 questions:

 -         The cost for you to acquire new customers

-         The value they bring to your business over time

-         And how long this process takes

3.2.3.1             Average deal size – ADS 

How big are your average deals? What drives their size?

3.2.3.2             customer lifetime – CLTV

If you win a customer, how long do they keep bringing you money? Is it recurring revenue or just a one-time project? How can you make it last? If you’re a start-up that existed for 2 years there’s no point in putting an expected CLTV of 5 years on there. You don’t even know if you’re still there in 2 years.

3.2.3.3             Average sales cycle

How long does it take you from the initial contact to get to the cash coming in? What are the roadblocks to make that faster?

3.2.3.4             Funnel conversion rates

Visitors // Leads // MQL // SQL // Opportunity // Closed won // Closed lost

You need to know your conversion rates at each step of the cycle. How else could you make any financial forecast? In order to help you with this, I’ve created a template to calculate all these metrics including benchmarks for SaaS companies. Check it out here

 3.2.3.5             Customer acquisition costs CAC

How much do you spend for marketing and sales to get a customer? This includes overhead costs as well as salary and any ad spend.

3.2.3.6             Sales velocity

Sales Velocity V = (#opportunities x $ Deal size x % win rate) / Length of the sales cycle

 3.2.3.7             Time to recover CAC

What to do once you know these metrics? If your CAC ratio is 1.5x, you are generating 50% more than you are spending to acquire that customer. Is this good? Depends on your business’s situation. A CAC ratio < 1 may be fine for your first 10 months if you have reasonable plans to improve it and enough in the bank. But if it’s under 1 and you have 3 months of cash reserves with no plans for improvement, you’re in trouble. Some businesses target a CAC ratio of 3x. Others are happy if they are over 1, with plans for improvement, financial resources, and growing.

3.2.3.8             What to do with all these numbers?

That may sound all nice but what do you do with all these numbers? Just collecting data won’t translate into sales automatically. Correct. So here’s what you do: 

• Identify your weak spots
• Think of ways to fix them
• Prioritize them by focusing on effort vs impact with a heavy bias towards speed of execution. If it takes too long to impact your revenue it might not matter anymore anyways.
• Go execute
• Review the impact on the numbers. Did your measures help? Why? Why not?
• Repeat the process

3.2.4              Automation

Do your Sales Reps take too much time in writing follow up emails and writing quotes? If there are no templates for doing that fast, now you add it to your task list. Do they still have to follow up manually or is there an automated sequence that interacts with the potential buyer automatically? Time to set that up

3.2.5              Scripts

Your Sales agent calls a lead for a to connect call? What does he say? Does he have a script? Is that written down? What happens during a discovery call? Which questions need to be answered? Is that written down and has everybody access to it? What happens next? How does the demo or the in-person meeting happen?

Each Sales rep in your organization needs to be able to answer every single question. Period. Closing will be hard and only if you can wake up your sales guys at 3 am and they know how to close you will survive the next 3 months. 

Summary of Sales

In short:

• Talk to your existing customers. Gain clarity on what COVID19 means for your projects.
• Have a clear process that everybody knows.: It provides focus on what, how and when to do.
• Have data on your activities. Without data, you cannot plan ahead for your liquidity
• Automate as much as you can: be efficient
• Have scrips and templates: be effective

Let's go-to area 2/4

3.3 Key Action 2: Systematic Lead Generation

In short:

• Have a clear and established process to generate leads for your sales team
• The sales cylces will be longer à Lead nurturing ensures that you keep in touch with the prospect
• Ads will get cheaper use it à When everybody goes into the dark mode, it’s your time to shine

 3.3.1       Clear Process how to do that at scale

Assess how you are currently generating leads for your sales team. Where do they come from? What amount are you spending on these channels and what’s the ROI (i.e. the cost per qualified lead)?

3.3.1.1             Ads

It might sound counter-intuitive but now it’s a great time to spend your money on ads. What, what? The big corporations that usually spend more money on ads in a month than you make in a year are currently freezing their budgets. This creates a lot of white space. We already see a decline in ad costs on Facebook’s ad platform. The key to success, however, is that you have a clear goal for your ads and process to get there. Just spending money on brand awareness does not make sense now which is why the big corporates froze their budgets. Clear targeting combined with a clear funnel will generate valuable leads that your sales reps then can follow up.

3.3.1.2             Organic

Increasing your organic traffic takes time. A good SEO strategy is something you build over the years. You plant the seeds to yield the harvest later. Unless you can provide actually meaningful information that is in need right now, I would not recommend to focus on SEO now.

3.3.1.3             Your best industries

What are the industries that contribute most to your bottom line? The 80/20 rule always applies. Identify the key industries and start focusing solely on them and their challenges. Account-based marketing/sales will also help you with that.

1. Identify your ideal customer profile (=perfect company)
2. Create a list of these accounts (use LinkedIn Sales Nav for that)
3. Identify the buyer persona within that company. Who's a champion, who's an influencer, who's a deal-breaker?
4. Create content especially relevant for these people.

Note that this is only recommended if you are selling to enterprises with deal-sizes larger than USD 100'000 as it does not justify the effort otherwise.

So here's an example: You are a logistics company for online shops? Currently, one of their biggest problems is not the demand (from their customers) but the supply from the factories that are at a halt at the moment. What can you do to ensure that they can meet consumer demand? Hold a webinar, write a blog post, create a podcast for the different buyer personas in that account. And then share that with your sales reps. They need that right now to provide value to their prospects.

 3.3.1.5             Longer Sales Cycles requires Lead Nurturing

As the sales cycles will get longer you will have to stay in touch with your leads and help them on an ongoing basis through their challenges. The content you’ve created for account-based sales is perfect for that. Two birds, one stone.

3.4 Positioning – what value do you bring to your customers?

 If you don’t stand for something, you’ll fall for anything

We all heart that quote. It's inspiring and motivating. But in the context now, it's also a warning. How so? 

In a situation where budgets are tight your business needs to be very clear on how to answer the following questions:

Which companies are we helping? = Your ideal customer profile (ICP)

Who am I talking to within these companies? = Your Buyer Persona?

• What are their professional goals?
• What are their challenges?
• What keeps them from solving them?
• Who influences them and their buying process?
• What are their concerns to your solution? 

HOW do I help my ICP and Buyer Persona with my product or service?

WHY should they care about that? If you’re not there anymore tomorrow, why would they bother?

Notice that I did not include the what question. Why you might ask? Because it does not matter what you and your products do. Nobody cares about the features. It’s about HOW it helps people to solve THEIR job. We all know the example that’s coming now:

 “People don’t want a 2 cm drill; they want a 2 cm hole in their wall”. The drill is just the tool to get them there. They don’t care about the drill. They care about the 2cm hole so they can put their flat-screen TV on the wall to watch the latest season of Narcos on there while they’re in quarantine.

Simply put: Stop selling your product – sell the results they deliver. 

If another solution or product can do that too better or cheaper then they will switch – unless…Unless they have a reason to care about you and your business. WHY should they care about you and your business? If your company goes belly up tomorrow, who would give 2 F's about it?

If you cannot these simple questions above and communicate them to your audience, you will lose. Nobody will listen because nobody cares. People have no time for lengthy explanations. Not in quarantine, not after.

Thus, all the questions above need to be boiled down into one single statement, your value proposition. Here’s a framework that’s easy to use and guides you perfectly:

We help [Buyer Persona/ICP] to achieve [The results they want to achieve] by providing [How you get them there].

So how does that sound for our company, BEE?

We help Swiss SMEs & Scale-ups to grow faster by establishing scalable & repeatable marketing & sales motions that deliver measurable results.

Taken apart:

ICP: Swiss SMEs & Scale-Ups with annual revenue of 10-100m CHF and a growth rate of about 10-30%

RESULT: Grow their business through a focus on marketing & sales

HOW: Finding and establishing processes for Marketing & Sales that are scalable and repeatable. To achieve that we have a performance-driven approach: we measure, learn and optimize.

Okay, so now we've covered the scoring side of things. Playing offense is fun for sure. But you're defense needs to be effective too. So here's how: 

3.5 Operational efficiency and costs

In short:

• How do Marketing and Sales work together? They need to work hand in hand now, especially now.
• Automate these processes as much as you can. If people have to lift a finger, they will forget to do that. Not because they are dumb, because they are stressed out.

Therefore I recommend you to gain clarity on the process of lead management, i.e. how are leads generated, qualified and handed over to sales. What are the qualitative and quantitative criteria for that?

After you've defined the process, now what can you automate? Trust me, most of it you can a lot.

4.   Summary

 We deal with high levels of uncertainty. Nothing inherently new is going to happen, only existing meta trends just been accelerated. Because we cannot know exactly what is going to happen, we cannot prepare for a specific scenario. The focus needs to be on adjustability. However, there are two specific areas that have been impacted:

1. Sales cycles will get longer
2. Online is the new normal

To deal with that, there are 4 Key Areas to take action in:

1. Sales
2. Lead Generation
3. Positioning your brand in an online world
4. Operational efficiency

 So how you put that into practice:

First, assess in which area you need help immediately. The case calculator and talking to your customers will help you with that. It will identify your Achilles heel.

Second, create a brief concept of how to fix the different problems.

Third, prioritize your actions by looking at the impact and the effort it takes to get there. Focus heavily on the speed of implementation (i.e. effort). No matter the impact, if it takes too long it might not matter anymore at all.

Fourth, look at the data again. Did your measures have a positive impact? Why? Why not? Learn from it.

Fifth, repeat.

5.   Final thoughts

You might think: “That sounds all good and makes sense but: Aren’t you just saying all these things because you provide the services to achieve them?” Yes, that’s true we can help you with all that, this is our business. The list of actions to be taken is not complete, it does not aim to be. But I only write about stuff that I know how to do. There are other points to be taken care of such as financial stress tests or reorganizing your supply chain. I’m not a consultant for CFOs nor supply chain managers. Thus, I have nothing to say about these topics. What I can help you with is to forecast your sales with this calculator that’ve built. I should be useful for your discussions with your CFO.

Now obviously, if you think: ?Hey Lanny, that was some actually powerful advice and I have some questions and maybe you can help me with my specific case? Then sure, please be my guest and book a meeting using the following link:

Grab a virtual coffee with me

It’s connected to my calendar and you can book your 15min slot there. If we can help you, we take it from there. I certainly can at least guide you to some resources. I don't want to be just the next guy to be a wolf in sheep's clothing and offer some "help". And honestly, to the companies that desperately need help, I think there are a lot of rescue lines thrown at them already. But if you're more in a mindset of "hey this is a challenging situation and it's time to separate the wheat from the chaff" - then we have the same mindset and I'd love to have a virtual coffee with you?

So far so long. I wish you all the best, stay healthy and as always:

Onwards & upwards ??

Lanny Heiz

"What stands in the way becomes the way" - Marcus Aurelius