I have just sent the following to my Vistage members; however, I think all could benefit from it.
The Coronavirus situation is changing by the minute. While I sent out what I would like to do at our meeting, I wanted to give you my thoughts on what is needed now.
The real situation in the US is unknown due to the lack of testing. At present, we have done about 14k tests, and we have 1,700 cases. What this tells me is that the situation is far worse, and the actual number of cases is far higher. As much as I hate to say it, right now, nothing from the Administration is believable as everything coming out of it is either misleading or evasive. I would listen to Dr. Anthony Fauci of NIH or any other credible public health officials as it pertains to the virus. Concerning the economy, look at the bond market. As a result of the Administration’s behavior, states are taking matters into their own hands as we have seen, and saw with Georgia yesterday.
This is a time of crisis, and as the leader of the organization, you need to step up and lead. As I said in my newsletter last week, leadership is hard, and it is about those you lead! First, your employees are scared – they don’t know what is happening or how vulnerable they are. I was grocery shopping yesterday, and not only are they out of toilet paper and hand sanitizer, but all the ramen noodles were gone, and so were the beans (all types). So you need to reassure them. That, in my opinion, is being honest – do not lie or minimize the situation, you will lose all credibility but be confident, what the potential impact is on your organization, what steps you take to plan and that you will keep them updated. Also, look for their input for suggestions, you are all in this together. For an excellent example, read Winston Churchill’s speech to the House of Commons, June 4, 1940, after Dunkirk.
Have a Plan
Now is the time to plan. You need to determine what you will do at each stage now. At what point do I cut various costs, people, stop operations, etc. It is easier to plan before the full panic hits. Work with your leadership team to think this through. The other members of your Vistage Group and I are always here to help, just reach out!
The Impact on You
Given how far behind we are, I expect within two weeks, we could see an Italian solution imposed. If that is the case, I would suggest you read this article to understand what is the implication. Regardless, the economic impact is going to be significant. Things to consider:
Work From Home policies, while we may be able to work from home, we need to consider if our clients and suppliers can Work From Home. If they can’t, you won’t be able to work for customers or get what you need from suppliers.
Cancellation of events. What impact does this have on you? How does it affect your clients and suppliers? Can you create virtual events for your customers?
Cash. How much do you have, how big is your line, and what is your burn rate. What can you do to reduce the burn rate without affecting quality and delivery?
Communication. I have talked above about communication with your employees. However, I would communicate with clients and bankers as both hate surprises. With clients, look to see how you can work with them through this and be proactive. Everyone is going to be reducing costs as the economic toll hits. If your customer doesn’t know you or understand the value you bring, you are out.
Private Equity (PEGs). Since the 2008 crash private equity has acquired an enormous number of companies in the US, many of these are now your customers. However, as we know and I have written about, PEGs have leveraged all these companies to increase their returns. With a substantial downturn, many of these will not be able to meet their bank covenants, and many may file for bankruptcy. Many of the larger PEG owned companies and public companies have taken on large amounts of junk bond debt and may not survive. Look at your client base and see what vulnerabilities you have.
Oil States. The current oil price of WTI Crude is $31.80 which is way below what is required for the fracking industry to be profitable. Given the high capital needs of the fracking industry, I think this is over. For regular oil companies, the price is too low to be profitable for many wells and they will be capped. Thus, oil companies are suffering, so economic pain is coming to all oil field support companies. This will affect all local industries and communities. Thus, if you have clients in Texas, Oklahoma, New Mexico or North Dakota, you may want to consider how stable they are.
Small companies. Many small companies may not survive this downturn due to a lack of cash. Look at your client and suppliers to see where vulnerabilities lie.
Financing. Hopefully, you aren’t relying on any soon, as I think the market will dry up as everyone waits to see the fallout. Like I said, keep in touch with your banker and don’t surprise them.
M&A. I think we can expect M&A activity to fall significantly this year. If that is in your plan as a seller, I would plan alternative scenarios. If you are looking to acquire, there may be some great bargains if you have cash.
Supply chains. While we all know of the issues from China, Europe is now shutting down. Understand those effects on your company. Further, the Administration’s ban on European visitors will cause air passenger traffic to fall significantly. As a result, I see the passenger airlines curtailing flights. The effect is that 70% of all trade cargo comes in passenger aircraft. So even if your supplier/customer is operating, the transport of products will be difficult.
I have been talking with a lot of you over the week. As your chair, I am here 24/7 to talk through any ideas you have, or just to listen if you need someone to talk to. It is going to hard, and it is very hard at the top! You can reach me on my cell or by video conference. In any event, I plan to be calling you all regularly to check-in.
Finally, apologies if this ruined your weekend, but better to be prepared than reactionary.
Copyright (c) 2020, Marc A. Borrelli
When you are a busy professional running your own business, it can often feel like there aren’t enough hours in the day to accomplish everything. Being strategic with your time is the best (and possibly the only) way to achieve all of your daily tasks. If you are...
So often, people view leadership as a talent: you’re either born with this quality or you’re not. However, this is not always the case! In reality, good leadership is made up of skills, and anyone can learn how to improve. Some people may pick up leadership attributes...
Do you have questions about how to calculate your business’s sellability score? Whether you’re looking to sell your business in the near future or years from now, understanding your sellability score will help you thrive. The sellability score identifies the...
As an entrepreneur running your own business, you know there are bumps in the road and struggles that both you and your business will face over time. However, with the right people and tools at your disposal, you can anticipate what’s coming, plan for it, and continue...
Every single business in the world wants to evolve and grow. This will happen using a variety of techniques and strategies. In 2022, digital marketing is more than a household name, and most companies will adopt at least a few ideas when long-term planning and coming...
Many entrepreneurs consider executive business coaching when they start struggling on their professional path. A small business coach is an experienced professional mentor who educates, supports, and motivates entrepreneurs. They will listen to your concerns, assess...
Dreams turn into goals when they have a foundation of long-term strategic planning supporting them. They become reality when the ensuing strategic implementation plan is executed properly. With Kaizen Solutions as their strategic planning consultant, small and...
If you are a CEO or key executive who has come to a crossroads or crisis in your career, you'll gain valuable insights and solutions from a peer group connection more than anywhere else. But what is a peer group, and how can that statement be made with so much...
As I mentioned last week, I am down with COVID and tired, so spending more time reading rather than working. I read Bill Browder's Freezing Order this weekend, and I highly recommend it. However, at the end of the book, Browder says that oligarchs, autocrats, and...
I am currently sick with COVID, so, killing time yesterday, I watched Downfall: The Case Against Boeing about Boeing's issues with the 737 Max and how the focus and financial results versus anything else led to the problems with the plane. The company focused on...