How Small Businesses Plan for Reopening (and Other Acts)

When small, high-growth companies—public and private—seek advice on how to handle tough situations, Adam J. Epstein is one of their go-to advisers. The former institutional investor is head of Third Creek Advisors in Silicon Valley and author of “The Perfect Corporate Board: A Handbook for Mastering the Unique Challenges of Small-Cap Companies.” We spoke with him about strategies leaders in the life sciences, technology, manufacturing, real estate, office services, and other industries are employing. After the initial wave of fear and panic, business leaders now are “problem-solving in a steady, measured way,” he says. “I can hear it in their voices.” (Interviews are edited for length and clarity.)

How should CEOs be communicating?
CEOs really need to fight the natural urge to retreat. This is a time when your employees, vendors, and others you rely on—all of your material stakeholders—need to hear from you regularly. It's not something you can farm out to people. And it's a time for you to be really transparent and honest with them. Don't just cut off contact with your customers because they're not buying anything. That's a big mistake a lot of companies are making. You need to ask how they're doing and if you can help with anything. They won't forget that.

What’s the best way to handle layoffs and other cuts?
Anyone who has ever done layoffs knows it's going to be the worst business day you've ever had. CEOs should do the layoffs themselves if they can. Employees understand that businesses are really challenged. They're not going to be mad at you if you do it honestly and compassionately and with integrity. You have to avoid the proverbial death-by-a-thousand paper cuts approach of doing a few layoffs one week and then a few more three weeks later. That really destroys what's left of employee morale. When experienced CEOs look back on difficult periods, they always say that they waited too long to cut expenses, and when they did, they didn't cut enough.

What's one problem most small companies don’t realize they’re facing?
Most small companies believe they are not on the radars of cyber bandits. That's a big mistake. I was speaking with a cyber insurance carrier recently that is expecting north of 90 percent of all of its clients to incur some type of cyber intrusion in the next three years. The bad guys definitely know who you are if you're running a small company—and they are unbelievably smart. They know this work-from-home ecosystem that we reside in today—and that many companies will continue to use even after the health issues ameliorate—is a great opportunity for them.

What should they do?

First, CEOs need to explain and re-explain email phishing and voice phishing to all of their employees. Even if they have before. Often, the bad guys have already broken into your email server and figured out who is who to manipulate you more easily by using real names and facts they find.