In downturns, it is extraordinary how quickly people rediscover business virtues that appeared to have been forgotten in the good times. Today the cry is “preserve cash”. Cut unnecessary entertaining. End business class travel and five-star accommodation. Get out of the taxi and back on the bus.
The usual cycle of responses to a huge shock or upset – denial, anger, bargaining, depression and finally acceptance – is of limited use. Cut straight to acceptance, and then action. But what kind?
I suggest my clients to explore the realm of other possibilities than just twiddle and despair. Commit to R&D seriously so that you have new products when sentiment reverses. With asset prices so low, it’s time to go shopping for acquisitions so long as there are significant synergies – as far as possible deal structures should facilitate cash neutral transactions (not necessarily stock swaps since it would mean diluting stakes at low valuations) with earnout milestones. Of course, I use other aces up my sleeves like technology swaps for stake, project specific commitments, mezzanine arrangements etc. that involve deeper dives into subtle nuances of a transaction.
But I always advise them to remember the acquired virtues of austerity and carry them into better times for business as and when it comes. But experience tells me they won’t.
Why? That’s how they let people like me get a life 😉