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What do you do when you're at your lowest flow point and 83% of your income is at high risk?
By:
Pepe Villatoro
We thought that Fuckup Nights an extremely resilient social enterprise, with no immediate threats.
We operate in 90 countries, handle multiple currencies, have two revenue streams, a strong brand, and high margins; many of our loyal customers who love us are stable and repeat business… what could possibly go wrong?
A pandemic.
A sudden global shift that could destroy our industry: the events industry. What do you do when you’re at your lowest point and 83% of your income is at high risk, when millions of pesos in contracts are about to fall apart?
We’d like to share some of the activities that Fuckup Inc. and The Failure Institute have implemented over the past three months; we hope they’ll help inspire more people to keep going.
Reaction
The first step was recognizing that we couldn’t predict what was going to happen. Instead of guessing, we created a daily COVID-19 update email that included global data on the pandemic and how our operations were affected. For example: “5 events canceled today.” This helped us gain a better understanding of trends, their pace, and the potential financial and operational implications.
In my weekly report, I shared a brief update on our financial status with the entire team. I was completely open about our sales, revenue, expenses, and runway (the time remaining before we run out of money). This transparency fostered a sense of ownership and focus within the team.
The next step in order to preserve cash was to cut all variable costs as soon as possible. We canceled or paused everything—suppliers, subscriptions, technology tools, and marketing experiments, among other things.
Prioritizing the health of our team (and third parties), we began working remotely on March 12. A month later, we decided to remain 100% remote permanently. Thanks to the nature of our global operations and our two former offices in Mexico City and Mallorca, the transition was a smooth one.
If you’d like to know how to go fully remote, be sure to check out our definitive guide to remote work.
In early March, we began working on improving our cash flow. We started requesting 20%–30% of the ongoing work or simply a deposit for future events. We made some adjustments to our payment policies in order to improve our cash flow during and after the pandemic
After the initial reaction, it was time to experiment and learn how to adapt.
Action
First, we transitioned to digital operations. We piloted our public and private client events as video conferences. After three weeks of trial and error, we were able to demonstrate the true value to our customers. We invited them to our public events, and after witnessing the energy, engagement, and impact, many decided to go digital and the results have been astonishing.
Then came the time to define our strategy and objectives, and although these were only temporary, they gave the team a clear sense of what they needed to do.
In short, our strategy was about“buying time”—that is, accepting the uncertainty and focusing on extending our runway. To that end, we launched two potential sources of additional revenue: sponsorships and a digital subscription offering content and experiences.
We identified three main objectives and areas to protect: our organizational culture, our salaries, and our ability to generate revenue.
To that end, we applied for a loan and had an open discussion with the team to propose a 30% pay cut (mine would be 50%), rather than laying off staff. This would allow us to cover payroll through August, and together we would find ways to increase our revenue and extend that deadline.
Banks weren't extending credit (or, in general, lending a single dime) to SMEs for the next three months. That's why we had to take out a loan with an interest rate nearly twice as high, and had to adjust our projections to account for that additional cost.
Once we had secured financial stability through August, we focused on generating new sources of revenue. We created four innovation labs with four clear goals: to validate our digital events until we achieved the same level of satisfaction as with in-person events; to validate the scalability of our new digital subscription project(thank you to those who have already joined, by the way); to find new digital content and video formats to generate more engagement; and to identify innovative ideas Fuckup Nights local Fuckup Nights and scale them globally.
Today we’re proud and happy because, thanks to our culture and the entire team’s resilience, our initiatives are proving effective, and over the past 7 weeks, we’ve extended our runway through December. We’re still bracing for the worst—a recession—but we feel more united, efficient, and capable of overcoming it than ever before.
Our goal is to share experiences and knowledge to help people live their lives to the fullest. We know we’re going through difficult times, and that’s why we wanted to share this experience with you; we hope you find it useful. Let’s keep moving forward and inspiring people together. Once again, thank you for being part of this new platform.
Pepe Villatoro is a globally awarded serial entrepreneur. He has created 5 companies and was the Regional Head of Expansion, in Southern Europe and North Latam. Currently, he collaborates with governments and companies to help create a shift in mindset. He loves traveling, having a good meal, and having good conversations.
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