From that, that shall remain nameless
The Advisory Board on Demand is a service to SME CEOs without an advisory board. We comprise six former and current executives from private equity, commercial and investment banking, HR, legal, accounting, and strategy with 125 years of accumulated business experience in transformation, mergers, and integrations. We would love to hear about and advise on your challenges. We levy no fee for the board meeting or report.
We asked the members of our Advisory Board on Demand what were going to be the five most significant trends likely to affect businesses when the economy re-opened. Turned out there were more than five 🙂
- Strategic Reassessment – expect companies to undertake complete strategic reviews:
- Of the clients and industries they serve; those who will benefit, those who will quickly bounce-back, and those who need substantial support (those that were highly leveraged before). Avoid becoming someone else’s “loser”.
- Much stricter receivables management
- Board agendas focused on purpose and differentiation and less obsession with homogeneity perpetuated by conflicted external advisors.
- Reputation vs. risk may mean initially supporting customers but who in the longer term you may choose to exit because of “bad ” downturn behaviors. What is the value of reputation?
- Be cautious of “free money” – principal holidays and interest deferrals are costly extended amortization loans. Some gifts should not be accepted.
- Know your borrowing covenants – what will your bank do if you fail. Think about the future immediately, which fires to fight and which ones should be permitted to burn.
- Working from home – people like to work in groups!! Working at home is only appealing for so long but while it lasts take advantage without damaging productivity? Expect significant changes in the physical footprint of businesses as they office-share.
- Digital Everything – barriers to moving more of our business lives online will fall; telemedicine and consultation, online training, remote working, exhibitions, shows, and product demos will transition. VR will have its hay day. To exploit and enhance performance SME’s will need to plan strategic pathways that suit their business model.
- A Quality Standard for News – news outlets will have to meet a consumer test (just like that electric kettle you just bought) to segregate fact-checked, (+/-) objective news reporting from propaganda, falsehoods, and clickbait. Public opinion that influences government action, needs to galvanize around authentic, reliable news particularly if there is a sense that there was a pandemic over-reaction.
- Inflation and the Economy – stricter standards, higher borrowing costs, and higher taxes will mean price increases. Consumers will demand that the cheap burger provider who limited sick pay and benefits, making us more vulnerable to illness, changes their practices. Expect economic recovery to be a longer U shape and come in stages by sector. Some will struggle to come back at all. Domestic production will be highly valued and international supply chains at risk.
- Anything is possible – these times have proved that the rules and certainties that we took for granted were artificial and when needs arise anything can be achieved, reinvented and repositioned. This will become a new mantra in the entrepreneurial world
- Business Succession – 2008 delayed the retirement of many business owners who are now faced with a similar challenge but are this time, 10 years older.
- An owner’s age will reflect on the prospects and value of a business and economic uncertainty will bring downward pressure to valuation multiples.
- Preparing for succession will become even more important. There is significant available PE liquidity for M&A but recovery timing will dictate its deployment. Traditional credit for M&A will be constrained and earmarked for existing clients.
- Virtual business due diligence is challenging, takes longer and no replacement for face to face interaction by buyer and seller. Physical plant inspections are problematic.
- Expect an active M&A market as sellers face new realities and adjust to lower values. PE will dominate as other buyers conserve cash.
Three Big Ideas – Fit First Technologies Video
Need a Yoda? We can help. We have seen a catastrophe or two and know a thing or two and prior solutions will continue to have a role. In the great recession, we worked without fees supporting clients through difficult times. We plan to do so again through telephone consultations, The Recovery blog, The Business Health Council and our Advisory Board on Demand; a service to SME CEOs.