Action Today for CFO’s

Jeff Epstein is on the board of Shutterstock, Twilio, Kaiser Permanente, and was the CFO of Oracle, DoubleClick, Nielsen and King World and is an operating partner at Bessemer Venture Partners. He teaches the Lean LaunchPad class at Stanford with me. And the minute he talks about financing I shut up and take notes.

He sent this message to the CFOs of his companies yesterday.
(Read it along with yesterdays survival strategy advice to CEOs.)

I thought it was important enough to share it with all of you.

Action This Day
Our first priority is the health and safety of our families, employees, customers and communities.

As CFOs, our next key priority is preserving cash.

For immediate action:
1. Evaluate your liquidity and likely cash out date under your worst-case scenario.
2. Objective: minimum of 18 months of cash. 24 months is better.

If you have more than 24 months, congratulations.

If not, take action now.

  1. Draw down all debt commitments. It’s like buying insurance. There’s a cost, but it’s worth it if things get worse. Ask existing and new lenders for additional funding.
  2. Make a list of all vendors, by $ spend amount. Call all large vendors and ask for lower prices. If appropriate, offer to sign a longer agreement in exchange for lower cash payments in 2020 and 2021.
  3. Review all marketing programs. Cut marketing by x%.
  4. Payroll costs are probably your largest cost item. If necessary, you may need to take action. Choices include:
    • Hiring freeze
    • Layoffs.
    • Cut all salaries by 20%. Cut CXO salaries by 30%. Award equity to employees equal to the value of their reduced salaries.
  5. Some of your customers will delay paying you; some will default. Credit card customers will dispute charges leading to chargebacks to you. Monitor collections and chargebacks frequently. Develop a playbook for mitigation.
  6. If you own bonds or other investments, review them for risk. Some companies, and perhaps some governments, may default.
  7. Because events are changing so quickly, have your CEO consider sending a short weekly email to your Board with any updates.
  8. Call if you’d like a sounding board to discuss the decisions you’re considering.

Most of all, stay safe.


5 Responses

  1. Thanks

  2. That is a great example of awesome leadership! Thank you.

  3. Dear Steve,

    I am a big fan. No, HUGE. But isn’t this advice 18 to 24 months too late?

    Should not this be like morning exercise, a daily routine of every competent CFO?


    G (Gennady)

  4. What do you mean by “18 months of cash”?
    A) 18 x monthly total cost?
    B) 18 x monthly cash-burn?
    C) Something else?

    Let’s assume our company is profitable and it has monthly revenue of USD 1m and monthly cost of USD 700k.
    I see no reason to have USD 12-13m in cash.

    • Hi Thomas – might be true in a world we lived in one month ago. Now, if your revenue is declining by +30% due to the demand shock of the recession – it could be helpful to have some cash on your bank account – right?

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