THE GLOBAL ECONOMY IS FALTERING

 

MANY BUSINESSES HAVE BEEN FORCIBLY SHUT DOWN.

 

We’re now navigating through one of history’s most extreme black swan events. The repercussions of economic suppression are severe, immediate, and ubiquitous. Even if COVID-19 is eradicated tomorrow, no one knows how long it will take for the economy to recover. And no one knows when COVID will be gone.

Businesses are like a human heart – they need to keep beating. You can’t just stop business, and start it up again in two months’ time. You need to keep your business ticking over. Experts suggest the economy will either have a ‘V-shaped’ recovery or a ‘U-shaped’ recovery (‘V’ meaning a sharp bounce back, or ‘U’ meaning a slow climb out of recession). The world may be facing its worst recession ever. Even once Corona has gone, the economy could take many months or years to rise from the ashes. However, we will conquer this. The human race is bigger than this, and it will prosper – eventually.

COVID-19 DEMANDS A NEW BUSINESS STRATEGY

Within any down-market, there are some incredible opportunities. We can already see an uneven distribution of the impact from this pandemic:

  • The health, delivery, and food sectors are struggling to keep up with demand – they need people and resources, now
  • Online SaaS and WFH tools are booming – Zoom is trying to keep up with demand
  • Home fitness apps and remote personal trainers are booming
  • Governments are spending unprecedented sums of money to support and stimulate the economy
  • The travel industry has been all but decimated Different parts of the lending/loan the industry may either do well or collapse
  • Warren Buffet will no doubt find an opportunity in this

 

SEQUOIA CAPITAL’S BLACK SWAN

 

On March 5th, Sequoia Capital, the preeminent Silicon Valley venture fund, raised an early alarm for businesses to be vigilant, stating: “Coronavirus is the black swan of 2020.” A ‘black swan’ is an extremely rare event with severe consequences. It cannot be predicted beforehand and can cause catastrophic damage to an economy. Sequoia’s sober message: “Having weathered every business downturn for nearly fifty years, we’ve learned an important lesson — nobody ever regrets making fast and decisive adjustments to changing circumstances. In downturns, revenue and cash levels always fall faster than expenses. In some ways, business mirrors biology. As Darwin surmised, those who survive “are not the strongest or the most intelligent, but the most adaptable to change.”

They highlight six areas for close immediate attention: Cash runway, fundraising, sales forecasts, marketing, headcount, capital spending. They encourage all businesses to guard their cash, reassess the fundamentals, and focus on the product (adaption, evolution). Some people will come out of this looking better than others. However, before there’s any rebuilding, most businesses will first have to cut costs and adapt.

How are you cutting costs? How will you adapt? How will you rebuild it? Will you find the opportunities amongst the threats? Every business playbook and every situation is different – but amidst COVID-19, 100% of businesses will be tracing these next three steps: (i) slash costs, (ii) adapt, (iii) rebuild. This is the new imperative for business in 2020.

 

SLASH COSTS, ADAPT, REBUILD

 

Business is hard enough – even in good times. However, in the hard times – to add insult to injury – you have to do more, with less. You have to evolve and be creative, there is no other option. You either sink or swim. Necessity is the mother of invention. When businesses are successful….. READ THE FULL ARTICLE

 

 

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