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3 Actions You Must Take In Times Of Uncertainty

The words I consistently hear on the lips of most cannabis CEOs and founders: Simplify, save, and sell.

Opinions expressed by Entrepreneur contributors are their own.


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That's the feeling that most commonly describes the impact of recent world events on founders and CEOs across the world. As entrepreneurs of small businesses, we're used to the ground shifting underfoot at alarming regularity. But this is different. The massive global crisis and subsequent economic upheaval brought on by the pandemic are disorienting to even the most seasoned operators.

In these last few weeks, my firm has been working closely with the management teams at the companies with which we have investments and talking with dozens of entrepreneurs seeking guidance. We are also managing our own operations and taking necessary action.

Everyone is impacted. Companies are going out of business, cash flow is being stressed from every angle, and investment capital is becoming even more scarce. Investment firms within the same segments are reacting differently to the same problems and government programs are floundering under the stress of record layoffs and SBA loan applications.

Despite the unprecedented challenges, and regardless of the industry and the specific business, I've noticed that there are three consistent action items that keep coming up at all of our meetings. These essential S's seem to be applicable to every company:

  1. Simplify
  2. Save
  3. Sell

Related: 4 Essential Ways To Manage Your Cannabis Business During The COVID-19 Crisis

Why you need to act now

The number one mistake in crisis management is to delay action. Even if you are unsure if the action is the right action, you must act. Doing nothing is a form of acting and can be terminal for a company in this environment. The good news is that any experience as an entrepreneur should prepare you for how to manage your business at this time. You can quickly regain your orientation if you cut through the noise and hyper-focus on what decisions you need to make in your company today. Entrepreneurs are arguably the best-suited operators to emerge successfully when things stabilize and markets rebound. We're used to this. Even during times of prosperity, entrepreneurs are always under threat. 

That's why every company should be acting. Even if you think you are in a relatively good position, you must be taking this time to evaluate every aspect of your company. Ignore the clichés. I see all kinds of advice to “prepare” for tough times. It's already too late to prepare. You need to act. And advice such as “watch your expenses, or conserve cash” does not provide enough actionable advice that managers can use today. Shouldn’t you be watching your expenses and cash flow all the time and not just now?

Now onto the 3 S's

1.  Simplify

Here are some important questions you should ask yourself: What are you learning about your business that you might not have been paying attention to before? Did you have the right people in the right roles? Did you have the optimal business model?

Now is the time to simplify and focus. Can you reduce your product offerings and simplify your customer offerings? Everyone is reducing headcount so how are you defining essential versus non-essential people? Are there whole business units that you can live without if they were shuttered so you can focus on the core business and keeping those people employed? Think about things in terms of what products, services, people and infrastructure is essential or “need” to have, versus “nice” to have. Even if you can afford something, it doesn't make it essential to your business. Now is the time to streamline and simplify as much as possible. The resulting business model and infrastructure are what you can take forward with you from here.

In the spirit of simplifying actions, any path to delaying fundraising and sustaining your business without it is the most feasible and sensible approach. i=Investment capital at this time will be scarcer and harder to secure. For this reason, without exception, I recommend that companies put their fundraising plans on hold for at least this quarter. If you take the actions outlined above and continue to assess and evaluative the business you will already be doing the things that investors will evaluate. Some questions to ask: Is the company able to preserve cash, can the business deliver value and produce revenue, can the infrastructure scale, do they have strong customer relationships?

Fundraising is a full-time job unto itself and not raising capital will add to your bandwidth and focus by subtracting it as an activity. The less complex your business is now the easier it will be to focus on what is important. When a company’s leadership has no choice but to act, decisions often get made that might have been necessary but delayed when the urgency wasn’t immediate.

I recommend approaching investors again in Q3, but only as an option, not as the only way you can survive. Your plan A should be to continue to grow your business organically so that your Plan B is to test the market to see what the investor feedback is. If you don’t like the terms then you should be in a position to not have to take investment and only be working with the best investor partners for you and your business.

2. Save

Great companies are always watching the pennies. Now more than ever, every dollar of spending needs to be highly scrutinized and viewed as negotiable. Rent, payables, contracts, essentially all your business relationships can be re-negotiated. A smart service provider would rather lock in 50 percent of what they were getting paid previously then lose the relationships and have zero revenues. You need to act on all fronts so everything should be on the table and open for renegotiating terms.

The resource that will be most difficult to replace after markets stabilize and begin to recover will be cash. If you have it on hand now, hold on to it. If you don’t you need to replenish your cash as quickly as possible.

Related: Three Ways Cannabis Businesses Can Save Money This Tax Season

3.  Sell

The single most important thing you can do right now is drive top-line sales. Just as you are reducing expenses everywhere possible, so are your customers. The cheapest (not selling equity or taking a loan) and most available source of cash is through revenue. If your customers are also simplifying then your action to shrink your product offerings will allow you to proactively engage with your customers.

Have open and frank conversions. Acknowledge that we are all experiencing similar effects and scrutinizing spending. Coming to the table with creative solutions will help you find ways to retain customers and good relationships. Offering payment terms, asking to extend contracts at better rates, or finding ways to deliver products or services at better prices will help you work with your customers.

The 3 S's are not a one-time fix. Running a business is an iterative process and these actions and level of scrutiny should be done on a regular basis within your organization. If you do that you will be able to take decisive action and continue to adapt for however long it takes to stabilize, and ideally expand, your business. This isn’t just about how to survive, this is the time to be a disciplined business owner and find ways to thrive.

Related: 4 Ways To Be The Balanced Leader Your Team Needs In A Time Of Crisis