Former CEO Says Lessons from Last Recession Can Help Businesses Today
Note: This article was originally published on March 25 and updated on August 31.
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. More legislation is on the horizon.
- 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.
- Organizations that applied for and received Paycheck Protection Program (PPP) loans experienced some relief but will now have to apply for loan forgiveness.
These are just the tip of the iceberg of how to manage a company during distressed times. Visit our COVID-19 Business Response Services page for more resources.
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.