Women 2.0 did a great article to help founders facing difficult times. They included thoughts from 15 founders, including our founder and CEO, Nicole Toomey Davis.

Consider asking your team to take a pay cut for the duration of the crisis – 10%, 20%, 30% depending upon your situation. If you have a vision that is compelling to your team, they will largely stick with you and you’ve just extended your runway. Of course, you’ve already cut your own pay by 50% before you ask! Remember that investors won’t “backpay” so make sure you’re clear that this is “sharing the pain” in order to ensure survival. Of course this is all more compelling if you have a good stock options program.

Note that if you get into a company threatening crisis, DON’T lay anyone off!!!!  Instead, increase the discount until you have some runway. Some people may leave, but you may be surprised at the number who stay, particularly if you are making progress at raising capital or selling the company. I’ve seen a cut for an entire software company down to $10/hour work and keep the team intact!

– Nicole Toomey Davis, President, CEO & Co-Founder of Enclavix

More of Nicole’s advice for tough times!

  • I recommend that entrepreneurs have a minimum of 1 year of cash on hand, and where possible, 2 years, which means skinnying up as capital declines. Investors don’t love this, but I’ve seen angels and VCs run for the doors when public equities collapse (as we have now) so the entrepreneur has to put the company and team’s survival as a priority.
  • Consider asking your team to take a pay cut for the duration of the crisis – 10%, 20%, 30% depending upon your situation. Call it the “Pandemic Discount”. If you have a vision that is compelling to your team, they will largely stick with you and you’ve just extended your runway. Of course, you’ve already cut your own pay by 50% before you ask! Remember that investors won’t “backpay” so make sure you’re clear that this is “sharing the pain” in order to ensure survival. Of course this is all more compelling if you have a good stock options program.
  • Note that if you get into a company threatening crisis, DON’T lay anyone off!!!! Instead, increase the discount until you have some runway! Some people may leave, but you may be surprised at the number who stay, particularly if you are making progress at raising capital or selling the company. I’ve seen a cut for an entire software company down to $10 / hour work and keep the team intact!Consider asking all of your vendors for the “Pandemic Discount” as well – particularly if you are a regular, loyal customer. Customer switching your business from a big, impersonal business to a smaller, more agile, highly motivated, local business willing to offer that discount. That includes your landlord, who is probably overcharging you compared to what new tenants will be willing to pay. This includes your attorney and your accountant!
  • Weirdly, consider offering your customers the “Pandemic Discount” to cement goodwill. Be candid that these are tough times, offer a discount, and ask what else your company can do to help your customers. You will likely be surprised that very few companies are doing this for their customers. Put yourself in that special category of “extraordinary” vendor.
  • I recommend that entrepreneurs “Design the Perfect Investor ™” – that is to only approach super targeted “perfect” investors and never waste time on local investors or big names, unless they are also Perfect Investors. A Perfect Investor is one who is WAITING for the vision that you offer. It is, in fact, possible to execute this strategy in the real world, and it is effective.