Action plan for startups in a down economy

I’ve been through two of these, like many of my fellow serial entrepreneurs. Once when the bubble burst around my ‘convergence’ company, Oxygen Media, and now again with my current company, Expo Communications. We're in a period of high revenue growth, so it isn't easy to distinguish what is critical spending and what is not. But you should be motivated thinking that your competitors - whether they compete for your customers, users or funders - may be acting faster and more decisively than you are right now. Here were some tasks that I've found effective for long-term strengthening:

1) Build Staff 2.0. You never have a second chance to make a first impression. Unless there’s a crash. Then, you totally can. Here are some thoughts about how to build Staff 2.0:

a. Be very skeptical of keeping headcount that is not directly attached to revenue, or in evidenced growth areas. There is no time to be investing ahead of success when success just got a lot riskier. It’s called right-sizing and it will save your company and the jobs that it should support.

b. Start with a blank org chart. Build an org chart with no names of people...just titles and functions. It helps you think less emotionally about who you'd like to keep and more about who the company needs.

c. Do it all at once. I can’t stress this enough. Doing it in a thousand cuts is demoralizing, painful, and will result in losing the staff you need to keep. Work very hard at shaping your target org, then create it in a humane but decisive process.

2) Support the resulting Staff 2.0. Your staff is far from stupid. They know why you made those changes. They silently questioned why that guy over there was writing copy all day. They might have liked that guy and thought he was talented, but deep down they didn’t think he was contributing to the company like they were. After your restructuring, bring Staff 2.0 together, and give them the positive news: this team is the team that you believe will bring the company to the promised land.

3) Extend your payables. Why are you paying on time when no one is paying you on time? You will pay…just a little later. The amount of working capital you will free up that first 30 days will amaze you.

4) Change old policies. This action may not save a lot of money, but it can start a culture of frugality that will benefit the company for years. Tighten the travel policy, and start tracking vacation days. Overhead contracts should be now treated as variable. Cancel all contracts you can terminate, and negotiate new terms with either existing or new vendors – HVAC, cleaning, legal, consultants, etc. Put new cost controls in place, such as additional approvals for discretionary spending.

5) Exude a positive attitude. Be transparent in all these changes and answer all questions about the health of the company, additional staff reductions. This is where your prior planning can help you answer decisively, clearly, and immediately. Having a plan can help you communicate with a level of certainty that you probably don't really have, but that your staff will crave.

As you make your plans, target a material amount to reduce – try to find over 25% of existing costs. You don’t have to make all the cuts, but forcing yourself to identify potential reductions is the first step toward honestly evaluating whether you need to make them.