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Management Maneuvers—Navigating a Cash
Crisis
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You may have the best team, product and technology in the world,
but the company is sure to hit the rocks if it runs out of cash.
You’re going to have to learn how to avoid and escape a cash
crisis if you’re going to have any chance of success as a
startup entrepreneur.
 Companies can run out of cash and die at virtually any stage of
development. After a crash, its not unusual for the management
and board of directors to claim to be the poor innocent victims
of a cash crisis that crept up and blindsided them. Of course,
looking back, we can all spot the warning signals, but in the
heat of the moment, these signals are often undetected, or
ignored. It is possible to find yourself blindsided if you don’t
take your bearings on a regular basis. When you know where to
look, it’s not difficult to detect a distant or looming cash
crisis.
After exploring these materials, you should be armed with a
better understanding of how you can find yourself heading for
cash crisis and a variety of strategies and ideas to help you
navigate the company through this difficult terrain.
Cash Crisis Management
After taking your bearings, detecting a distant or looming cash
crisis and fixing your position somewhere on the slippery slope
to cash crisis, you’re faced with an interesting range of
options: |
 Preparing
to Navigate a Cash Crisis: |
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Steps in the Cost-Cutting Process: |
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Steps in the Process of Slashing
Costs: |
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a) Ignore your findings and blindly soldier on.
b) Spend valuable time trying to figure out where and why you
went off track.
c) Point fingers to apportion blame.
d) Become despondent and do nothing.
e) Prepare a plan and take action to cut costs, raise funds and
get back on track.
f) Produce a hockey stick sales forecast so the crisis magically
disappears.
g) Attack the navigator.
If you selected e)—congratulations! You get to continue on the
journey with at least a chance of success. Many companies seem
to select option a) in conjunction with f)—they make a few
tweeks to the sales spreadsheet, take little or no action to
avert the crisis and end up crashing, in spectacular fashion.
The options open to management include the following:
- Accelerate Fundraising Efforts
- Accelerate M&A Efforts
- Execute Momentum Maneuvers
- Prepare for More Radical Maneuvers
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Cut Costs |
 You’re running out of cash—with every dollar you spend, you’re
taking another step down the slippery slope to cash crisis. You
can slow your descent by cutting costs. The deeper you cut, the
slower you descend. The slower you descend, the more time you
buy to raise funds and take action to avoid Shutdown.
Cutting costs can only go so far without damaging the company.
Slashing costs involves reinventing the company, stripping out
product lines and cutting back to a skeleton team.
A layoff can convert an upbeat team making marked progress
into a down beat team in a state of paralysis. A single layoff
is bad enough for moral, but a series of layoffs sets a worrying
pattern for the remaining team—often with disastrous effects.
Making a positive effort to maintain momentum and retain an
upbeat team is critical. If handled properly, the layoff process
can be remarkably smooth, even uplifting.
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Slash Costs |
 People are capable of adapting and filling the gaps left by
departing colleagues, however, this can only go so far. If you
slash the size of the team, say from
fifty to fifteen employees, you can’t expect to continue in
business as usual. Making radical cuts in the size of the team
can be done, but it involves going back to basics and
reinventing the company.
Slashing costs is not always a depressing activity. It can be an
opportunity to refocus the company on its core business,
reposition the company in the market, drop unprofitable product
lines, re-think the marketing strategy and draw up a new
business plan.Running on Fumes
It’s sometimes possible to radically cut costs and run the
company on little more than fumes for a period of several
months. As well as holding off the creditors, the challenge in
this situation is to prevent the core technology team from
heading for the hills—a technology company without its
technology team is pretty much worthless.
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to: Maneuvers 
