Over the past week, many clients have asked us what they can do to navigate their businesses through these choppy seas of economic, political, and social volatility.
We don’t pretend to have a one-size-fits-all answer to this question; it does not exist. We appreciate that every business is going to be tested in different ways and to different extremes. Some may have a cash flow problem. Others may have difficulty maintaining a high performing culture. Our private equity clients may have challenges with deal flow, while their portfolio companies may have debt management issues.
However, if there is one guiding principle that helps us consult clients during this time it is the idea of not letting a crisis go to waste.
In 2008, at the start of the Great Recession, Rahm Emanuel said, “you never want a serious crisis go to waste. And what I mean by that is it’s an opportunity to do things that you think you could not do before.”
With this in mind, we share a broad framework for how to emerge from this crisis stronger than ever.
Reinforce and act on the core values of your company culture
How management teams react in crisis situations defines the culture of a company. All the good will and loyalty generated during times of stability can erode overnight if there is not clear and relevant communication coming from the management team, or if employees lack confidence in management’s ability to act with boldness and live up to the company’s core values.
Pro Tip: Frequently measure employee demeanor and satisfaction, identify barriers to productivity and engagement, flag employees that might be financially at-risk, and follow up with regular 1:1 conversations to ensure you’re leveraging your most important asset – your people. As an example, here is a link to one of the internal surveys we conducted this week.
Do whatever it takes to keep “The Fort” secure
If you are familiar with our 80/20 business practice, you likely are familiar with the concept of "The Fort." The Fort – your most valuable customers who purchase your most valuable products/services – typically accounts for 65% or more of a business’s revenue. These are your top cash flow generators that will sustain your company through this crisis and propel you out of it.
Pro Tip: Look at your business through an 80/20 lens and identify the 20% of your customers that are generating 80% of your revenue and treat them differently! Focus all efforts on prioritizing these “critical few” customers at the deliberate expense of deprioritizing the “insignificant many.”
At the bare minimum:
- Make sure they have (and know that they have) direct and 24/7 access to the management team and their account manager
- Proactively update them on the status of operations
- Be commercially flexible in order to maintain (if not grow) your share of their wallet
Take advantage of cheap capital
This crisis may result in the loosest monetary policy we’ve ever had, and the cost of capital will likely become very cheap. Already we’ve seen the Federal Funds Rate drop to 0.25% and Treasury yields hit an all-time low. While leveraging up might be a scary thought right now, leading indicators suggest the fundamentals of the economy are strong and full recovery is likely in the short term.
Pro Tip: Depending on where your company is in the business cycle, consider taking advantage of low rates to reinvest, refinance, or recapitalize. Prioritize investments which will ease bottlenecks, accelerate innovation, and better position your business to ride the wave of recovery.
Finally, we like to remind our clients of the important role their businesses play in the functioning of healthy economies and healthy societies. It is possible to do good business by doing good, and what better time is there than now for businesses to step up and flex the leadership role they hold in their communities and among their stakeholders.
Anthony Bahr is a Vice President at Strategex. He can be reached at firstname.lastname@example.org.
A Note from Strategex:
Our hearts go out to all those impacted by COVID-19. Our thoughts and prayers are with those diagnosed with the virus, and their family and friends. We empathize with those whose jobs and schools have been impacted and all those who are experiencing personal challenges during this time. Our focus is, as always, on the health and safety of our employees, clients, and communities.
Strategex is continuing to monitor the impact of COVID-19. We are committed to continuing our services and providing value to our clients. We are fortunate: our workforce is able to seamlessly transition to remote work, and there is no disruption in service. We are also working virtually with our clients to enable the same level of attention, guidance, and results for which Strategex is well known.
At Strategex, we teach our clients to use data to focus on what is important. In times like this, we encourage you to focus on what’s most important: your health, safety, and family.
Read more of our message here.