Managing & Navigating Your Enterprise during Turbulent Times

The ongoing COVID-19 crisis is a “black swan” event that caught the world by surprise. It reminded me of an investor who told me during the dotcom bust of 2000 that nothing should be taken for granted and that good times do not last forever! And this was especially true of business. I have lived through the dotcom bust, 9/11 and the 2008 financial crisis. These crises affected us all, and in hindsight, easier to think about some decisions that impacted us. But the current crisis is much more intense and likely to have a greater economic and financial impact. Enterprises, especially the small and midsized ones, will need to focus on risk, maximizing cash flow and making decisions that will determine the destiny of their businesses and their employees. 

Cash is King! Given the importance of cash flow in times like this, businesses should immediately develop a treasury plan for cash management as part of their business continuity and survival plans. Such plans should include a full ecosystem and end-to-end business perspective, as the decisions and strategies taken to manage cash will have implications on the business, its employees and customers. 

Here are a few takeaways to keep in mind:

• Survival is Key

This is essential. Without survival, there is no upside or a future. All strategies are about survival and getting through this.

• Cash is King! Everything else is negotiable.

Do whatever is needed NOW to extend your runway and have enough cash to meet expenses. Remember that your revenues will be impacted, and your customers may not have the ability to pay. You should plan for at least 12 months of cash because it will take some time for business to get back to normal even after the health crisis abates.

• Revenues will be Impacted

Plan on at least 50% or even more of your revenues to be impacted. Most businesses will in survival mode, especially mid-sized and small businesses. Unless you are operating in an industry like healthcare or essential services, your revenues will be impacted with at least two quarters seeing reduced revenues. A lot of your customers may be reviewing contracts, which may result in cancellations or renegotiated contracts. 

•  Financing/Funding will be Challenging

If you were raising capital, plan for longer investment cycles. While institutional investors will continue to invest, valuations will be impacted, and they will want a more comprehensive review of business models and cash flows. Think of capital efficiency! Though there are bank lines that will open up, expect those to also take time to close. If your business needs large amounts of cash, you will have rethink business models at least for the short to medium term. 

Not all enterprises will get financed. Hence, assume that the pullback will take last for a while and plan accordingly. As I mentioned, it is always good to have at least 12 months of cash as dry powder. M&A options will also be non-existent for the time being. You may have to look at emergency lines of credit, bridge financing from existing investors or an increase in your line of credit from your bank to provide some relief.

•  Non-Equity Cash

Explore non-equity sources of cash; they could be voluntary salary reductions, certain grants that may be available, exploring cash discounts to customers to shorten order-to-cash cycles, and short-term deals that may help with immediate cash. 

•  Opportunities

Every crisis presents opportunities, and the same is the case with the current one. Crisis offers us the chance to look inward at our business models, our customers, and our offerings. This is the time to think “outside the box” and get creative. Can I look at new models? Are there potential partnerships that I can create? Can I leverage technology to offer solutions online? Are there short and medium-term deals that I can do?   

As with almost all things in life, this will pass. Hopefully, you will be stronger. The landscape will look different, no doubt. If you are nimble and flexible, there will be great opportunities. Watch for them and take advantage of market conditions at that time. Nobody at this point can predict when it will happen.

And finally, stay positive, take care of yourself and your employees. Communicate often and well with all stakeholders, giving them the bad news and the good news.