In these current difficult times, everything in the future is going to be determined by health considerations.

The removal of lockdown, the opening up of international travel, and the bouncing back of economies will all be determined by the effectiveness of the containment of the COVID-19 virus. Until vaccines are found, which, in the absence of miracle cures, are probably 12 to 18 months away, we will have the situation where the only certainty about the future is … it will be uncertain.

Uncertainty creates a landscape that is risk averse. When that landscape has a feature that has shown itself to result in fatalities, it is risk aversion on steroids. We feel threatened and with that threat, the survival instinct kicks in. This affects both individuals and corporations.

Back in 1943 Abraham Maslow identified a psychological model for us as human beings:

In his hierarchy of needs model, he identified there are two critical and core needs that everybody has as human beings. Physiological and safety cover our very basic needs – food, water, shelter etc, and as we devel

op as human beings we go through layers of softer, more ethereal,  development needs. Right now, in the COVID-19 landscape, we are all focused on 

our basic needs. Not only is this driven by the tragic, fatal consequences seen, but also in the current economic conditions

Stock markets have plunged across the globe and unemployment is rising – a natural result of social distancing and lock-down. This has further been exacerbated by the oil markets that have been in free-fall. Overall, global Financial markets are deeply challenged which may have far-reaching effects on markets further down the track. With so many disparate views by pundits and talking heads in the media, no one really knows where this will finish up or how bad the effects will be. The facts, however, show rising unemployment, slowing economies and unprecedented fiscal stimuli across the globe all within a landscape of fear of an unknown virus that has the potential to kill. It doesn’t get more basic than that.

As a result, as human beings we will all gravitate towards the lowest two layers of Maslow’s hierarchy of needs. Any areas above these core areas become broadly irrelevant in current times. Not unreasonably, this means the general zeitgeist globally will tend to focus on how we keep a roof over our heads, and how we put food on the table for our families. Just look at the queues in the food banks in the United States where people never thought they would have to face the situation of having to reach out to the generosity of charities. So, what does this all mean for product development for businesses, especially start-ups?

With recessionary times, these base-level psychological needs from Maslow’s hierarchy of needs are likely to continue. Any products that focus on the immediate physical well-being, and the retention of employment will tend to be the focus of attention of most customers, and as I have continued to rationalise the current global circumstances, I recall my own experiences in 2000 pitching a video-based email marketing project in the United States. As part of a UK trade mission, we were invited to pitch to investors in Silicon Valley. There was an experience at one event in San Francisco that has resonated with me today.

At this event there were perhaps 200 investors. At the back was a lone, very loud voice of an investor, who was from central-casting. He was the cliché of a white middle-aged American investor with an aggressive tone. As demur, ever-so-polite Brits, myself included, made our pitches this voice resonated throughout the event:

“is this a vitamin or a pain killer?”

His philosophy was very simple; if you have a headache you need painkiller right now. Vitamins are a nice-to-have but not essential. If we are facing recessionary times, as individuals focus on their survival instincts, vitamins will not cut it. Your 

customers, right now, want painkillers, not vitamins.

So, think about your customers. What are the current pain points your product solves? If there are none ask yourself,  how can you help them relieve their current pain points? This is not rocket science. In tough times we always cut back. We might go to the hairdressers every six weeks instead of four; we might have one cup of coffee a day rather than two. Collectively these all add up, but also have a tendency to become self-reinforcing. When we start talking about recession, the zeitgeist tends to talk ourselves further into recession. But there is something else going on; something that means we may have no choice but to accept it.

There was a report that came out from the Guangzhou Centre for Disease Control (DCD), that highlighted the unfortunate power of transmission of COVID-19 and its power to generate clusters: 

The diagram highlights where a COVID-19 carrier had dinner on Jan 24. Within close proximity of other tables, you can see how the COVID-19 cluster developed over the subsequent 14 days. There were people on tables 10 feet away that contracted the virus. The core theory is that the air conditioning played a key role in spreading the virus. This speed and power of transmission has major implications for all countries as they open up from lock-down. 

As a result of this modelling, social distancing models will continue to be implemented as a strategic narrative. This means fewer people sitting and eating in restaurants.  This is in addition to the fear factor associated with individuals potentially contracting the virus itself, in addition to reduced budgets associated with the fear of losing jobs, homes etc. So, if we have enforced social distancing, it means that restaurants will open at 25%– 50% of their capacity. This presents major problems for restaurateurs.

The economics of running restaurants is very tight. Volume is required to generate the necessary profitability to pay all expenses. If volumes are reduced because of social distancing, and concerns over job security, viability is called into serious question. Ultimately, restaurateurs get to the position where they are perhaps covering variable costs of staffing and making a contribution to overheads but not making any money for themselves. This is not sustainable. When we replicate this across different industries for example gyms, clubs, bars etc there are deeper self-reinforcing forces at play to suggest the recession will continue. But how will Maslow’s forces be replicated among corporations?

Corporations also have an unwritten sense of Maslow’s hierarchy of needs. In recessionary times, non-essential expenditure is cut. Traditionally, advertising and marketing are the first to go. Equally, when corporations look at headcount, they look at cutting temporary contractors. This makes sense because if the post-COVID-19 landscape shapes up to be an (unlikely) V-shaped recovery, the last thing any corporate wants to do is to lose full-time staff in favour of temporary contractors as they will have to re-employ those lost permanent staff almost immediately. Temporary contractors can easily be replaced. In uncertain times Corporations tend to go into lock-down mode themselves, focusing on consolidation, cutting costs and preserving cash. 

Cash is the very lifeblood of any business. Without it, a business fails. Businesses do not fail because of a lack of profitability they fail because of a lack of cash – to pay debts as and when the full due for payment. Corporations will preserve cash by:

  • cutting unnecessary costs 
  • paying bills later and 
  • chasing customers earlier for payment. 

This means any business that services corporates are likely to face delayed payments. This also means those businesses that are priorities will also get paid first. For example, a distributor will want to pay its main supplier first to ensure continuation of supplies – these are their own hierarchy of needs to ensure the business survives. There’s another effect that happens to cash in times of recession – the way banks react.

Banks hate recessions, as do their investors. Banks become what is known as “risk-on”. Credit departments look at every way in which they can reduce their exposures and reduce the risk of bad debts. Banks themselves hate bad debts with a passion. If you look at the economics of banking, you can see why.

Banks buy money from the wholesale markets, and also use the deposits that we leave with them. They make a margin on the funds they buy. So, for $1 million loan, they might make between 2 ½ to 4% Margin, plus any fees they charge. If, however, they have a bad debt of $1 million, they will need to lend out approximately $25 million to generate enough profit to cover that bad debt of $1 million (ie 4% margin on $25m loans). As a result,  the banks become paranoid about credit risk and bad debts, causing them to close their doors to new business and to also do some unpalatable things.

As an ex-banker, I have seen Banks do some despicable things in times of recession and I have no doubt that these will repeat themselves. Tactics will range from automatically cutting facilities, especially overdrafts, which are repayable on demand and, perhaps, when an entrepreneur refinances their family home to inject funds into the business, the bank takes all money and reduces the overdraft immediately. Unfortunately, I have seen this happen more times than I care to remember. So, if we are faced with businesses preserving cash, and banks restricting credit, recessions can generate self-reinforcing cycles. If bank credit is tighter, the desire to stretch out suppliers and chase customers quicker becomes even more important.

Corporates focus on the bottom two layers of their own hierarchy of needs: survival through the maintenance of cash, and the second layer of generating and maintaining revenues from customers. Discretionary spending falls – with one such discretionary item being innovation.

Innovation is all about long-term competitive advantage. Innovation leads to new products and new potential sources of revenues. In the recessionary times, the narrative is about survival and the preservation of existing cash and profitability. So, for start-ups, it becomes increasingly important to look at corporations in the same way we might look at individual customers and ask the question – where do their pain points exist? If your product is innovative, you need to ask yourself “how big is the pain point it solves?” Also look closely at the likely payback on your technology – is it going to generate a high or fast return on investment for corporates? The lower or slower that return, the more unlikely the corporate will support you. By understanding these simple equations, you can help corporates with their innovation strategies, whilst at the same time ensuring sources of revenue for your business. And if this strategy is not working – be prepared to change.

In terms of your own business, you have to understand that Maslow’s hierarchy of needs is perhaps even more pertinent for early stage businesses.

There are three key critical priorities you should consider very closely:

  1. your own cash is king
  2. you will have to fight hard for Sales and revenues
  3. you need to be nimble and flexible to adapt to new environments

1. Cash is king

In regards your own cash needs, it is essential to plan, plan and plan again. When you look at your business, take a cold critical and objective view. Ask yourself: 

  • How long is your runway? 
  • How can I cut costs without jeopardising the business? 

Sometimes, you will need to take difficult decisions. You may have to say goodbye to team members that have supported you from the very beginning; and that is extremely hard. 

The challenge is that alternatives are not easy. 

In the current environment, global recessions will mean raising finance is going to be increasingly difficult. As we have seen above, Banks are highly unlikely to support you as a new customer. Equally, equity investment is going to be very challenging. Equity investors will lose their investment in full if your business fails and so will back those with less risk. 

So, in the absence of external capital, the only form of cash preservation that can be generated from revenues, is from cutting costs, chasing customers stretching suppliers or, depending on your country, tapping into any available stimulus packages appropriate. 

2. Fight hard for sales and revenues

When we consider sales, the most important focus must be on your existing customers – to preserve the precious lifeblood of existing revenues. It will be far harder to generate new customers in the current environment, than by focusing on your existing customers. Talk to your current customers – find out where their true pain points are and develop your ideas to solve them. And when it comes to new customers, go hard, and then go harder. Contracts will be harder to close, and your competitors will be in exactly the same position as you – they will be fighting tooth and nail to win the same customer you want. So, keep hustling, and then hustle even harder.

3. Flexibility 

Flexibility is essential. Your business has undoubtedly been built by your ability to move into new ideas to solve new problems quickly and efficiently. That flexibility is the way that you have perhaps beaten many corporates, to win deals. It is essential that you have the flexibility to iterate your ideas, or, even to pivot to new products that customers will actually pay for. This flexibility is essential because the only certainty about the future is that it will be uncertain.


Overall, this is going to be a very difficult time for all of us. Whenever there are problems, however, there are also opportunities. It’s about finding them and executing on them effectively. 

As long as you’ve planned ahead and have worked out strategies to ensure your survival and your continued success, you are halfway there. An old mentor of mine from many years ago once said something to me that is particularly relevant today:

“no one plans to fail; they only fail to plan”

It is worth considering finding mentors to help you through these difficult times, mentors that have been through recessions in the past to help guide you through.

The COVID-19 landscape will end – but none of us know when. At least by adopting some of the above ideas and being flexible your business, you will be in a far strong position to capitalise on the new opportunities that will arrive in the post-COVID-19 landscape. Just accept the next few months will be tough and that longer-term stability will only begin to return once a vaccine is found. So, strap yourself in and prepare for difficult times ahead. Much as you might not see it now, if you take a long-term view on the whole situation, your future self will look back on these times as the turning point that showed you the marked opportunities for growth that exist if you have the flexibility to adapt.

Maslow was right about all our base needs. Rationalise those needs for all your customers, retail and corporate and find those painkillers. We all need painkillers right now, we can wait for the vitamins.

Good luck and stay safe.