A founder's guide to crisis management

Key takeaways

1. Sort any crisis into one of two buckets first: a cash crisis (runway threatened by lost customers, vanished investors or missed expectations) or a product-market-fit crisis (your core value proposition stops mattering because of market changes, regulation or competition).
2. In a cash crisis, work out your remaining runway and cut expenses right away. Levine says to make the critical decisions within the first month, before your options narrow.
3. Since 70% to 75% of a typical budget is people, cost cuts usually mean laying off part of the team, cutting everyone's salary by a percentage, or cutting management salaries.
4. Before pivoting after losing product-market fit, check that the problem is real, that you have a tech, team or knowledge advantage, that you still have the passion and energy, and that your team wants to go that way. Then take the new vision to investors.
5. Prepare before the crisis arrives. Levine suggests 12 to 18 months of runway as a guideline, because being low on cash means you spend your time fundraising instead of building value.