Like many of us, I am too young to have operated through a recession.
Turnaround has been my focus for a while, but always in the context of a relatively healthy economy, meaning both equity and credit have been very, very plentiful. I have been able to leverage vendor's balance sheets to clean mine up, juice the shit out of creditors, raise equity, etc np.
In 08/09 it seemed like liquidity vanished overnight, making the above impossible. In Q1 we start deleveraging quite a bit, building more of a cash buffer, etc. Very glad we did.
What are other steps we should be taking to operate in an environment where cash doesn't fall off trees?
Cut the fat early, focus on cash maintenance.
If there are employees that can be cut, think through the plan to cut them. If there are projects that can be postponed, do that and save the cash. It's not just cutting, investing in automation and better processes, to pull cost out in the near future is also a viable option.
Lean into vendors and push your customers to pay early. Think through whether a small discount is acceptable for faster payment from customers.
There will still be lenders of last resort but that gets expensive.
Essentially, turn over every stone for inefficient and ineffective processes. During covid, a fair amount of our clients cut heads and other operating expenses so they could make it through, ended up helping the businesses in a way they wouldn't have achieved otherwise.
It's a tougher mindset to shift into, but ignore the "history" of the business and try to analyze what an efficient, lean operating business would look like, then you can plan how to get there, then you can make decisions about what would be worthwhile to pursue.
Edit: get as granular as possible. If the business has stores / facilities, do it at that level, otherwise regions, states, etc. Sometimes things are hiding in consolidated numbers.
Yeah we're pretty strong at operational improvements, cutting working capital needed to run a co etc, but was more curious from a macro perspective? IE can we push wage cuts if macro falls out and unemployment goes up?
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