Former CEO Says Lessons from Last Recession Can Help Businesses Today
The last recession took over 18 months to develop and caused bankruptcies for the following five years. During that time, I sat where many of you are today, leading companies through a crisis. I experienced bankruptcies as the CEO of a private-equity-owned company and the Chief Restructuring Officer for a family-owned business.
As the world faces an impending recession caused by the COVID-19 pandemic, every business and organization must manage through this crisis. Some will go bankrupt, while others have the potential to come out on the other side stronger.
In my experience leading companies through bankruptcy, here are the lessons I learned:
- Cash flow management and communicating with your lender is critical. The government is putting in place disaster relief loans for which your company may be eligible.
- Crisis communication is even more important. Setting the proper tone at the top and providing a calming hope to your employees is critical.
- Communicating empathy while trying to manage customer payments is very important. Communicating with and managing your vendors to keep operating is also vital.
- Many companies don't have reasonable cash flow forecasting models to use to ensure they are getting results. Your vendors and banks may require this to grant more credit or expand borrowing capacity.
- Making tough decisions on operational and labor cuts are extremely difficult. The government is providing some relief options that every company should try to utilize to avoid making cuts that will be painful and cause negative goodwill for years to come after the recovery.
These are just the tip of the iceberg of how to manage a company during distressed times. In the coming weeks, the accountants and business performance advisors at Brown Smith Wallace will share additional insights, resources and tools to help guide leaders through the challenges of managing an organization in the midst of a recession.
Stay tuned, and if you have any questions in the meantime, please contact Bryan Graiff, Partner in Charge, Transaction Advisory and Litigation Support, at firstname.lastname@example.org or 314.983.1390, or your Brown Smith Wallace advisor.