I previously spoke about the downside of being a cash positive business during a crisis, the impact of Covid-19 on Capillary, and the hard calls we had to take to stay afloat. This will be the last post of the series and I wanted to wrap this up by sharing some of the things that leaders can do to ensure everyone involved with the business is treated well.
Keeping your team going
A pay cut and a deferred bonus after what was a pretty transformative year is not what you expect as a team. I felt it was really important to have constant communication with the folks and give them updates about the company and the overall business outlook. We have run 50+ all hands, one every week for the whole company and an all-hands with me in smaller groups of 15 – 20 Captains over the last 3 months. On Zoom, we have had a 75%+ attendance on an average for the all-hands, we never saw such high attendance even during the physical town halls! We have had the pleasure of having Rajan, Alok and KK addressing the teams over the weeks and sharing their experiences from past recessions and what the breakout companies did differently. We did an employee NPS survey in Jan and another one at the end of April – to our surprise, our rating was better in April than in Jan! It’s been amazing to see everyone rally together to navigate these tough times. We had to enforce a no-meeting lunch hour, remind people they can take leaves and decline meetings during WFH. We are now announcing a 4-day company-wide shut down from July 2nd to July 5th to give everyone some forced downtime!
Doing the right thing for your customers
Given that our customers have been badly hit by the Covid-19 crisis, the first response could have been to avoid any communications for the fear of dealing with discount/renegotiation requests. But we chose to do the exact opposite and offered a 4-week fee waiver spread over the year to all customers who were impacted by the lockdowns. We have spoken to every customer at least twice a month, shared data on our learnings from China and built a WhatApp CRM-Commerce product similar to WeChat CRM-Commerce that worked in China even during the lockdowns. We are currently charging for this solution on an outcome linked basis. We have extended payment terms for every customer. We have also offered some of our other products (especially our ecommerce stack) on an outcome linked pricing and are helping customers to go-live with an online store in about 4 weeks.
Treating vendors well
Unfortunately in India, vendors get squeezed the hardest during an economic crisis, and being a B2B company ourselves we felt the pinch here as well. All finance folks feel they have an unsaid KRA of holding money for as long as they can, I wish this changed in India. When the crisis started in March, our first response was to hold back payments and we did; it’s not something I am happy about but I don’t think we had an option. In April we prioritized clearing the payments for all our smaller vendors. The larger vendors were paid in May and June as our cash flows improved and the funding also came in. We are now at a normal to slightly stretched 60-day cycle. I must thank our cloud providers, system integration partners and SMS providers for being patient with us. Again, I think it’s important to have honest and transparent conversations with vendors and give them clarity on whether you can pay or not. The worst thing to do is give wrong payment dates and upset their cash flow planning or worse, just avoid taking their calls. I still think Capillary needs to improve in this aspect.
Where are we now?
It’s been good to see things coming back to normal. On an average most of our customers are at ~50% YoY, our Chinese customers are at 95%+ YoY. While the data is optimistic, I still believe that the new normal on an average across Asia is probably going to be 85%. Our May and June cash flows have been at 80% of normal, and we have decided to pay out the FY20 employee bonuses with the June salaries. We hope to reverse the pay-cuts in the July quarter as well. We are likely to sign-up as much new business in this quarter as we signed up in OND 2019, and we are taking as many customers live as we normally did. Considering the ground we have covered, I also feel Capillary stands a good chance at being cash positive for the remaining three quarters of FY21 as well.
I think it would be prudent to wait for another quarter before saying that we are out of the woods, but I think we can all safely say the worst of Covid-19 is behind Capillary. I definitely think we have been fortunate to have avoided descending into the downward spiral of doom, but as the adage goes – fortune favours the brave. Also, one post facto realization – it’s better to take the hard calls early and prepare for a worst-case scenario in unpredictable times, rather than living in constant stress and uncertainty and reacting to every negative news. I feel you think with more clarity when you have a reset and not stressed about every negative trend that comes out. I think we moved fast and moved hard and it helped us to channelize our efforts in doing the best we could for our past and current employees as well as our customers.