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Sun,05Jul2020

Adjusting to a new future

uk-economic-outlook-june-2020-fnal.pdf

During the ‘Dot-com’ bubble burst of the early 2000’s, more than half of all digital start-ups collapsed and during the height of that recession 51 companies a day were closing in the UK, with around 27,000 by the end of 2009. (source: The Independent).  It feels inevitable that we will enter a recession (two successive quarters of economic downturn) following this unprecedented global pandemic. 

Most businesses will suffer in a recession, usually because demand reduces and uncertainty increases. Experts are talking about this being like no other similar economic situation witnessed, there have been no oil price increases, financial panics, and most governments have moved to implement unprecedented measures to assist companies to ‘hunker down’ and weather it out as best possible. 

But whilst it is unlike previous downturns, there are certainly some lessons that can be learnt and there is plenty of evidence to support how you might weather this storm and come out of it in a relatively strong position ready to build again. 

During the recession of the 1980’s, 1990’s and 2000’s, 17% of companies studied either went bankrupt or were acquired (source: RBH article). The same study found that 9% of companies came out of the recession and flourished and by that they mean outperforming their competitors by around 10%.

Other more recent studies by Bains and McKinsey show that the number one factor on hitting the ground running is preparation. Having a plan of what to do and thrashing out multiple “what if” scenarios – involving your leadership team and getting them focused on problem solving each scenario, documenting it and then moving onto another and so on.

Many companies are going into ‘survival mode’ right now across multiple sectors but whilst in this mode, care needs to be taken of reacting too defensively. If you cut too far you can hinder all chances of a longer term recovery.

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