Are you a Wartime or Peacetime CEO?

Business is war (usually)

It was a perfect storm. Payroll and loan payments were set to hit on the same day. And the largest vendor was demanding payment for some stale invoices. Oh, and your best customer was dragging their feet on a (very late) invoice.

Business owners are battling every single day. Whether it’s:

• Trying to win new business or grow sales
• Dealing with difficult employee situations
• Taking calls from suppliers who wanted to get paid yesterday
• Making sure there’s enough cash in the bank to get through tomorrow

“In times of adversity and change, we really discover who we are and what we’re made of.” — Howard Schultz, CEO of Starbucks

First, what is a Wartime vs. Peacetime CEO?

These terms were originally coined by venture capitalist Ben Horowitz of Andreesen Horowitz in his book The Hard Thing About Hard Things (an excellent read for any entrepreneur).

Some definitions (according to Horowitz):

• “In wartime, a company is fending off an imminent existential threat.”
• “Peacetime in business means those times when a company has a large advantage vs. the competition in its core market, and its market is growing.”

Translation? Your environment + current business situation are the key determinants of wartime/peacetime.

How do you know which one you’re in right now?

If you answer yes to any or all of these basic questions, then you’re likely in a wartime environment:

• Margins and/or revenue are contracting
• New competitor(s) are entering your market
• Significantly behind on vendor payments or A/P
• Constantly monitoring cash for fear of running out

Why does this matter?

First, if you don’t know which mode you’re operating under, then you’re potentially taking the wrong action, focused on the wrong areas, or moving too slowly to effect change.

Wartime = urgent

Peacetime = deliberate

This concept feels super relevant today… since 2020, we’ve experienced: COVID, interest rate hikes, supply chain challenges, cost inflation, and now tariffs (maybe). Meaning we’re all dealing with at least a modest amount of war right now.

Want to know the real truth? Running a business is almost always wartime. How often do businesses casually grow at a healthy rate with plenty of profitability and cash flow to boot? That’s a unicorn. Most of us are dealt the oddly misshapen piece out of the Ikea box that doesn’t quite fit.

So what should you do with this?

How you act and where you’re focused matter a heck of a lot more in wartime mode. If you’re in peacetime operations, you can afford to be more strategic, try things on for size, and slowly course correct. As Ben Horowitz noted, most/all business and management books are written under the pretense of a peacetime setting.

Here’s a cheat sheet for setting the tone at your company depending on your situation:

Here’s what each of the look like:

• Peace — Your firm saw good growth the past 3 years and profits expanded to all-time highs. Things have cooled lately, but they’re bouncing around, not falling dramatically. Your bank lines are comfortable and you have both cash and savings balances. There is freedom to think big picture, how are you going to grow this over the next 3-5 year stretch? Your product team has a few exciting ideas in development and marketing is dialed into core SKUs. Culture is healthy, burnout is low, and you’re methodically working toward the next target which is 1-2 years away.
• War — Sales fell 50% in total from your 2-year ago high. Chances are good that you’ll run out of cash in a few weeks. The bank line has availability, but you’d better work out Plan B & C. Inventory is piling up and marketing is asking where to discount heavily. You decide to quickly blow out of lowest 10-15 products at a deep discount. You’re on the phone with vendors, assuring them things will be fine, and they will be with the right gameplan. Cash is gold and you want to stockpile as much of it as possible. You’re making decisions and taking action daily; working toward the next target which is 30-45 days away. It’s rapid and hectic, but you see incremental progress in stopping the bleeding.

Step 1 is to figure out which environment you’re operating in. Step 2 is to look at your current operating style to ensure it aligns with your environment. Don’t be deliberate if there isn’t room for it. Don’t be hasty if things are running smoothly.