Today I was reflecting on all my conversations with entrepreneurs over the last three weeks. What entrepreneurs are talking about has changed drastically. And this makes perfect sense given the pandemic. But beyond the obvious, I believe the change reflects a shift in entrepreneurs’ mindsets.

The economy has been mostly expanding for the last decade or so. Until March, there didn’t appear to be anything that would prevent 2020 from being another growth year. Most entrepreneurs were focused solely on growth. They planned to raise capital, hire people, and execute on growth-focused initiatives. The metrics they measured and discussed were usually growth-oriented.

The pandemic is a clear and present danger and has brought some businesses to a standstill. It’s now clear that 2020 will not be a year of growth for most, and for many it will be a year of deep contraction. Most entrepreneurs I’ve spoken with are trying to gauge how much business they’ll lose and figure out how to reduce the size of their team and their expenses while maintaining positive cash flow. The metrics that are now being measured and discussed focus on efficiency.

In my opinion, during economic expansions most entrepreneurs accept a certain level of inefficiency in the name of growth. They’re trying to move as much water as possible from point A to point B. They know water is slopping out of the buckets because they’re moving fast, but as long as more water is pouring into the tanks at point A, it doesn’t matter. But during economic contractions, the same entrepreneurs embrace efficiency. The water source dries up, so they put lids on the buckets and carry them slowly to make the most of the water they have.

Having experienced growth mode at CCAW, I recognize that it’s very difficult to get a team to focus on growth and efficiency simultaneously. When you’re growing, you live by the done-is-better-than-perfect mindset. There are more things to do than there are people to do them. Your people will become frustrated if they’re told, “Move fast! Get it done! Oh, and do everything perfectly. No waste or mistakes!”

Without a doubt, there will be pain in the short term for many entrepreneurs. However, I strongly believe that the lessons we learn during this period will help our companies endure.

Today I had separate conversations with two friends who are entrepreneurs. The Paycheck Protection Program (PPP) came up both times. The program was just announced, so many things still haven’t been sorted out. We agreed, though, about the importance of understanding your runway so you can plan how to navigate the PPP process and communicate effectively with your team, your bank, and other important stakeholders.

At CCAW, I always knew the length of our runway. This equation gave it to me:

• net cash / average monthly fixed expenses = runway (in months)

Here are some inputs we can use for an example:

• cash bank balance: $200,000
• accounts payable (how much you owe others): $50,000
• monthly payroll: $50,000
• monthly rent: $5,000
• other monthly fixed expenses: $7,000

Here’s the calculation:

• Net cash: $200,000 (bank balance) – $50,000 (accounts payable) = $150,000
• Fixed monthly expenses: $50,000 (payroll) + $5,000 (rent) + $7,000 (other fixed expenses) = $62,000
• Runway: $150,000 (net cash) / $62,000 (fixed monthly expenses) = 2.4

This business has 2.4 months of runway left if things get really bad. Of course, this is a worst-case scenario. It assumes the business won’t collect any cash (accounts receivable aren’t included). And it assumes that fixed expenses won’t be reduced. It isn’t meant to be a perfect calculation. It’s just a snapshot to help inform decision-making.

This calculation was revealing to me, especially during difficult times. Every day, I knew how much time I had to right the ship before drastic measures would be required.

I encourage entrepreneurs to regularly calculate their runway and communicate it to key people, internally and externally. This simple metric is super-powerful. It can rally and focus people rapidly, which is critical during difficult times.

Today I was reviewing the lifeline that I created for CCAW. Something jumped out at me: how hard the journey was in the beginning. From 2007 to 2013, we grew at a healthy rate (with a few resets along the way) and surpassed $1M in revenue for the first time in 2013. Then beginning in 2014 our growth accelerated dramatically and we recorded eight figures in annual revenue by 2018. Seven years to get to $1M and then more than ten times that number within five years!

There was one major thing that was different about those two time periods: high-level talent. In 2014, we hired a COO and CTO. In 2016, we hired another executive to focus on technology. So, in 2016 there were four high-level thinkers focused on growing the business to our defined goal of eight-figure revenue. We had tons of strategic projects that we were executing on independently and collectively. When there were roadblocks or challenges, we huddled to share ideas. Usually, we broke the huddle with an agreed solution. (Some debates did get contentious, but that’s OK because we got to the right answer.)

Before those three hires, it was just me. I did my best to identify the right solutions. Often that required doing research to fill the gaps in my knowledge. I implemented solutions. I managed all the company’s teams. Twenty-four hours a day just wasn’t enough time for one person to do all of that and do it well. The effort was mentally and physically exhausting. The company’s growth, I now realize, wasn’t what it could have been in those early years.

Hindsight is 20/20 and I wouldn’t change anything. But along the way, I learned—the hard way—the benefits of high-level thinkers being part of an early team. You can exploit your strengths to divide and conquer, hold each other accountable, and bounce ideas off each other at critical moments. These, plus a ton of other reasons, are why VCs are hesitant to invest in solo founders.

If you’re in the early stages of growing your business, consider learning from my experience: involve a cofounder or other high-level thinker as soon as you can.

When I began working on CCAW full time, I was doing it out of my apartment (WeWork didn’t exist). It was 2008. Because of the financial crisis, I was trying to stay lean and keep the lights on. After a few years, I started to feel like the only human on a tiny island. My personal network could no longer relate to my professional struggles (my family and friends didn’t have entrepreneurial experience). Conversations increasingly ended with, “Well . . . I hope you figure that out.” It was discouraging. I had gone from interacting daily with peers and higher-ups in corporate America to seldom communicating with anyone professionally (except by email and phone). There was no way for me to talk through my struggle with anyone who understood.

Deciding things needed to change, I sought out entrepreneurial groups. I found Entrepreneurs’ Organization (EO) and was super-excited until I learned that I needed $1M in annual revenue to qualify (I was at about $200k–$300k at this point). I kept pushing forward and discovered that someone I knew was a member of EO’s Atlanta chapter. We discussed my predicament, and he told me that EO had created EO Accelerator for people in my position (less than $1M, but with the potential to reach $1M with some help). I asked for a warm intro to the person running EO Accelerator in Atlanta.

Joining EO Accelerator was a turning point in my entrepreneurial journey. Just like that, I was part of a group of peers—people who had taken action on their entrepreneurial dream (they had customers and revenue), were at about the same place (less than $1M), had similar goals (grow to $1M+), wanted accountability (we met once a month for four hours), and were committed (we had to pay an annual fee).

The experience turbocharged my growth. I was now learning from the successes and failures of others, which saved me a lot of time. I was exposed to entrepreneurs in other industries and was able to apply best practices from those industries to my space (this is how I was introduced to tech). I presented my ideas and got unbiased feedback from peers. Within a few years, CCAW’s revenue exceeded $1M and I had a great professional network and a great set of friends. Joining EO Accelerator was pivotal and I’m thankful that EO created the program.

Whatever you’re trying to do, don’t go it alone if you don’t have to. There’s a lot to be gained from working with and learning from other people in similar situations.

I’ve been using Zoom video calls to conduct meetings for the last few weeks. Zoom is a perfect example of a startup (well . . . it used to be) that improved on an existing product rather than creating something new. Zoom’s founder worked for Webex, and he realized its product was becoming obsolete in the age of cloud computing. And Webex’s acquisition by Cisco, a large enterprise company, slowed Webex’s evolution.

The founder saw an opportunity. Wouldn’t video conferencing be better if it was designed to work on cloud computing infrastructure? He built a beta product, raised some capital, and the rest is history. Today, Zoom is publicly traded and has a market cap (i.e., worth) of more than $42 billion. Its product is popular with customers even though it has lots of competitors and it wasn’t the first video conferencing product. (Side note: Zoom currently has an enterprise value of forty-five times 2020 projected revenue. For most publicly traded SaaS companies, this number is in the vicinity of ten.)

Many entrepreneurs feel they should create something transformative that no one else has thought of. But building a better mousetrap can be just as rewarding. (I’m not saying it’s easy—the product usually needs to be ten times better than existing products to scale quickly.) Zoom is a great example. Its founder combined his deep knowledge of video conferencing (his “unfair advantage”) with new technology (cloud computing) to create a much-improved video conferencing experience that customers love.

I like this path because everyone isn’t an idea person or futurist. Most professionals, though, have years of experience in some corner of the world of work and can easily tell you what people don’t like about it and how it could be improved. A great startup idea could spring from that specialized knowledge.

Today I had a conversation with a close friend who is an entrepreneur. His business has multiple locations that provide services to children. We discussed the pandemic and how it’s affecting him (local stay-at-home orders forced him to close). He’s concerned, of course, about the well-being of his fifty employees and of his customers.

The biggest thing bothering him is the uncertainty. He doesn’t know how long he will have to be closed, which makes planning difficult. And he doesn’t know what to tell his team. He’s also not sure whose directives to follow. The city’s? The county’s? The state’s? The federal government’s? I sympathized with him and we decided to brainstorm about ideas to help him through this.

During our conversation, he settled on a strategy. He’s going to make contingency plans for closure lasting one, two, three, four, five, and six months—different plans for each scenario. And he’s going to communicate this approach to his team members, vendors, and customers. Proactively managing the situation is important to him.

I’ve never run a business like his, so I’m not familiar with its nuances. But the merits of his overall approach are obvious, and I give him a lot of credit for coming up with it. He isn’t worrying about things he can’t control. He’s accepting uncertainty, planning as best he can on the basis of the information at hand, and communicating his plans. They won’t be perfect, and things will likely change, but I’m confident that his employees, customers, and vendors will appreciate not being kept in the dark.

I believe strongly in the impact of timing. When I incorporated CCAW, it was spring 2007 and the economy was going strong. I figured this trend would continue, so a few months later I made a leap of faith and quit my job. And you know what happened next. In 2008 the country was in financial crisis. Things looked bleak. No one was buying my products and my last employer was laying people off (no way would it rehire me). For the next two years or so, I was in survival mode.

For CCAW’s business model to work as I envisioned, I had to pitch a new way of doing business to automotive vendors. In 2007, most of them weren’t receptive. But in 2009, they were open to almost anything. I seized the opportunity and never looked back. We took that new way of doing business, added some technology, and over the next decade built a company with eight-figure revenue.

Looking back, I can see what happened. I finally got the timing right. In 2007, I was too early. My vendors were doing well financially, so they had no incentive to try new things. A year or two later, they were desperate for new ideas—with revenues down 30%–40% they were looking for ways to grow again.  

I believe you can be too early, too late, or right on time. Sometimes this means you have a good idea but your timing is off. Recognize when you’re too late or too early and adjust accordingly.

Tomorrow, I’m speaking with a group of rising entrepreneurs about my experience founding CCAW. They’re all very early-stage, don’t have established customer bases, and may not have a product–market fit yet. I’ve been pondering what will be most helpful considering the allotted time (it’s hard to condense more than ten years of insights into twenty minutes) and the reality of the pandemic. I decided to prepare by mapping my CCAW journey in a lifeline (a diagram of the major highs and lows of something, such as a life or a career).

Doing this exercise recalled to my mind lots of great (and not so great) times. I decided to focus on sharing the lows of my journey. My goal isn’t to be negative or pessimistic—quite the opposite. I’m assuming things have gotten very difficult, very fast for this group. By sharing my low points, I hope to communicate these points:

• Take advantage – Negative experiences mark us the most, and they shape entrepreneurs. Appreciate this time as a learning opportunity.
• Change – People are forced to embrace change when times are tough. Make wise changes.
• Cycles – They’re inevitable. Those who survive downturns ride the wave up and do well. Focus on keeping your business alive.
• You’re not alone – Every entrepreneur (and every business, for that matter) is dealing with the same pandemic. Find a peer group. Their experiences—if you pay attention to them and apply them—will help you navigate this difficult time.
• No comfort zone – When you’re uncomfortable, you’re usually growing. Get comfortable being uncomfortable.
  

Yesterday I spoke with a close friend about the current business landscape. He’s an avid investor and regularly trades his own stocks. Throughout the day, he checks the market’s performance, and he always knows how each of his positions is performing. The conversation turned to the market downturn and all the negative economic news. I asked him how his portfolio was doing, and to my surprise he said he didn’t know. I probed a little more and he admitted being too scared to look.

Reflecting on this, I realized I had once done something similar. Every morning at CCAW I was provided with and reviewed a series of reports and metrics. They detailed our current state (MTD revenue, cash position, A/P balance, etc.) and projected our future revenue and profitability. These reports were critical to my understanding of our current performance and where we would probably end up. If I didn’t like our trajectory, I could be proactive and initiate actions to change it.

We had a rough patch when we were constantly being hit with bad news. Week after week, macro things were happening that affected us negatively. After a while, I stopped reviewing the daily metrics and reports. I told myself I was too busy and tired, but the truth was that I didn’t want to see the data quantifying how bad things were.

I realized that I didn’t have the experience to navigate these rough waters on my own. I owed it to the team to do better, so I hired an advisor with experience in grappling with challenging business environments. One of the first things he asked me was how bad it was. I told him it was bad, but I didn’t have exact numbers because I hadn’t looked at the data. I expected him to chastise me, but he told me that was normal. (In fact, he had done something similar when one of his companies struggled.) It’s human nature, he said, to avoid bad news during difficult times. He encouraged me to start looking at the data regularly and discuss it with him. I did.

Takeaways:

• Don’t avoid – A bad situation doesn’t get better because you avoid it. Look at important information regularly so you can make better decisions.
• Data availability – If you don’t consistently have access to critical information, you can’t plot a course. Consider taking time to put processes in place to make that information available.
• Communication – Whether your numbers are good or bad, share the news. People will appreciate not being kept in the dark. You never know—someone may have an idea that could change things.

Have you ever found yourself avoiding during a difficult time? If so, what did you learn?

Today I participated in a conversation among successful entrepreneurs in a variety of industries about COVID-19’s impact on businesses. COVID-19 is bringing crisis to most companies.

As we talked, I reflected on a perfect storm in my past. Macro political changes were negatively affecting my business, a member of my immediate family had an unexpected life-threatening medical situation, and I was facing personal headwinds with the potential to upend my private life. It was not a fun time. The stakes were incredibly high across the board. One bad decision and life could spiral out of control quickly. I was stressed, to say the least.

I learned things then that I shared today:

• 80-year-old’s lens – Fifty years from now, when I’m in a rocking chair telling my story, what will matter most? Relationships, not accolades or wealth. I needed to align my current actions with this future perspective.
• Priorities – I’m only human. My time and energy are limited, and I can’t be effective in every domain at once. Viewing things through the lens of my elderly self, I prioritized the headwinds pushing at me and put family first. I got comfortable with the idea that other balls would drop and things would get ugly before they would get better.
• Communication – I couldn’t immediately focus on lower-priority headwinds, and there were people I cared about who would be affected by that. I clearly explained my thoughts to them. Some agreed with my priorities and appreciated my honesty. Others were extremely upset. I made sure they all knew what my top priority was, how I would be allocating my energy, and how I came to that decision.
• Focus on the light – I focused on the light at the end of the tunnel, not the darkness of the tunnel I was in. I figured that once I was out of the tunnel, I’d have plenty of time to reflect on why I’d been in it.
• Experienced advisors – I pulled together an informal group of people I respected who had experience in areas in which I was inexperienced (I even sought out and paid one person). I asked them to share their experiences with me and incorporated them into my decision making.
• Emotional control – Emotionally, I was riding a rollercoaster. But I was purposeful and made sure my emotions didn’t dictate my decision-making, my actions, or my words. I took time to talk through my decisions with people I trusted and asked them about my blind spots before I took action.

Did everything turn out perfect? No. Was the process painful? Yup. Could I have done some things better? Absolutely.

In the end, it all worked out. It took a while, but looking back, I’m happy I addressed each headwind separately. The passage of time with no action on some of these problems made them worse in the short-term. But what I would have gained from trying to solve them all simultaneously would have been outweighed by the toll it would have taken on me and the people around me. I don’t think this approach would work for everyone or every situation, but it worked for me in that perfect storm.

If you find yourself buffeted by a perfect storm (and you will if you’re an entrepreneur long enough), take time to think. Navigate it your way—not someone else’s way—consistently with your ethics and morals.