What happens after what happens next?

The 6 things to do now to prepare yourself for what comes when the Corona recession ends

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What happens next is a recession. A painful and deep recession. There is wall to wall coverage of the impacts of the medical and economic effects of the Corona Virus, and my reckons on that are much less valuable than the experts on pandemic response.

This post is about what comes after all that. How will you be prepared for the expansion that comes after the recession?

The here and now

You are in the trenches, laying off valued staff, cutting expenses, trying to collect debts and holding the bank at bay. The short term consequences of shutting down travel and sheltering at home are devastating. Professionally and personally. Not only that, but the wall to wall media and social media means that you can’t escape.

So you don’t think you have time to think about the future.

But I’m here to tell you that, like every crisis, there will be an end to the coming recession and expansion will begin again. It seems cruel to say this, given that the real recession hasn’t actually begun yet in many places, and the personal impacts of laying off people are real. I’ve been there – during the GRC – laying off good people who didn’t deserve it. Tough on you, and even harder on them for sure.

But every time there is a downturn, companies cut and pull back, slash and burn and reduce capacity. Then they are left flat-footed and unprepared for the inevitable expansion that will follow like day follows night.

We can see the end from here

There are some bright spots forming:

China shows that when you take it seriously and lock down the country, the virus burns out. Italy – now only a week or so into full lockdown, is seeing a ‘flattening of the curve’ as the number of new cases starts to flatten.

The rest of Europe, the US, Australia and New Zealand will get worse before they get better – but because we watched what happened in Italy, most modern economies have put in place some forms of social distancing, testing and isolation.

Not perfectly for sure, but action is being taken on the medical/social front.

On the economic front, different various flavours of fiscal firehose are being applied to the fire, and a monetary flood is washing through the streets. The New Zealand government announced a package equal to 4% of GDP. That’s a big firehose. Others will do the same.

So action is being taken on the economic front – not perfectly for sure, but action is being taken.

China is now about 11 weeks into their plan – taking the beginning of January as the start of the actual response after a month of denial and miscalculation. And the results in China are encouraging for countries that are just going into the eye of the storm. Factories are starting to reopen. Log exports from New Zealand ports to China have restarted, and are climbing towards pre-shutdown levels. Apple has re-opened its 42 stores in China while shutting down stores in the rest of the world.

Do not get me wrong. There are dark days ahead. Many dark days. Particularly if you are in an industry that is directly impacted by travel and transportation. The recession for those industries may be longer and deeper than others. But the storm will pass, and when it does there will be a huge rebuild, and an opportunity to grow.

What you need to do

These are the things that you need to think and plan through now to best position yourself for the future.

1. Survival
   This is obvious – but to take advantage of the future, you need to survive the present. You know what to do so we won’t talk more about it now except to say these 2 things: cash is king; and great employees are gold. So conserve the first by trimming only the lowest performers from your team. Keep people on if you can, because they will be the foundation of your growth when you come out the other side.
2. Funding for growth
   Money is never going to get cheaper, and there is pressure on banks to lend. They need to shovel all that monetary stimulus out the door. Don’t be shy – most business people are wary of taking on debt in a recession, you need to do the opposite. You need to negotiate the biggest line of credit, on the best possible terms, that you can. A line of credit is the dry powder that you will spend quickly when you see opportunities to grow coming out of the crisis. Don’t take on equity if you can help it – equity is your most expensive form of funding, and right now investors are on the sidelines. Get the biggest line you can, and don’t spend it yet.
3. Customers
   Some of your customers won’t make it. But many will. Start an exercise with your senior sales guys today (they aren’t doing anything else!). Do an analysis of each of your customers and identify the ones who are strong. When the crisis is over, those customers are going to grow fast. Reach out to them and start talking about what will happen next. Stand by them now, do what you can to support them. One of the problems in Corp.America is that loyalty to suppliers is non-existent – the a****les in procurement will not care that you helped them out, they will still try to beat you up. But other execs will know. Now is the time to connect with those execs and create relationships that will help you get past the procurement beating later. Be there for them now so they can be there for you later.
4. Competition
   Some of your competitors won’t make it either. This is not the time to try to hasten their downfall – they’ve also got good people who will get hurt. So don’t try to steal customers or spread rumours in the market. Now is the time stand together. Your actions will speak to your character and what you do will be noticed. Get your product and marketing people to analyze every competitor carefully. Pay particular attention to cash and recent deals. If you think that there are competitors who will not make it, now is the time to acquire, merge and consolidate. You need to take capacity out of the industry. Use that dry powder. The key here is to do it the right way. Don’t be unreasonable, don’t take advantage of the position, don’t slash and burn. In short, don’t be a dick. But play from a position of strength and try to consolidate the industry now.
5. New ways of working
   Over the next few months, you and your team are going to get used to new ways of working. New tech for collaboration, communication and productivity. Now is the time to make these investments and to get new processes in place. Now, while your team has a lull in customer activity – get those new tools in place and invest in training (and more training). You will find that productivity takes a hit in the first month, so you need to really focus on discipline to get the team back on track. You will need to spend on new tech for this, and spend time on getting the team aligned. You will not regret any of this in the long run. Get these new ways of working baked into your culture. Don’t slip back into the old way of doing things when the crisis abates. Now people are getting used to working from home, reduce the size of your office footprint permanently. Also aim to keep your travel down in the long term.
6. Fix the machine, and build new scalable machines for the future
   Now is the time to put your team on green fields opportunities. In number 1 above, we said you should try to keep on as many of the team as possible, even if you don’t have the work for them. That extra capacity should be invested right now in improving your business. Think of the company as a machine – now is the perfect time to invest in the maintenance and improvement of that machine. Do a strategic planning process to identify new markets that you can create post-Corona. Invest in product planning to fix problems in the product (now is the perfect time to retire that technical debt that has been building up in the good times). You will get the team engaged and positive. Create new business plans and imagine new products. Now is the time to start living in the future.

After you have secured the now, you should be investing every waking minute planning for the future.

There will be an inevitable rebound, will your business be the one that wins that rebound.