We’ve read a few articles lately claiming that survival is not a strategy. The arguments in Anand Rajaraman’s article on GigaOM last month are sound, and if we understand them correctly include not prolonging a business that will never likely “win” or be healthy or have an exit resulting in wealth creation for the shareholders. It’s hard, or more appropriately put, impossible to argue with that logic. A quick death of a company that would otherwise die is a good thing for shareholders and employees.
That said, we think it is very hard in these times to look into a crystal ball and figure out if your company will survive beyond the current economic downturn. If you were growing aggressively before the downturn and are either moving sideways or down slightly, then there is a good chance that you can continue to grow once the economy turns around. If you have such a company (rapid growth followed by flat to down coincident with the economic downturn), then investing your capital in additional growth might be suicidal.
Surviving the economic downturn is a requirement for you to grow after the economic downturn. Capital, including both debt and equity, is not likely to be easy to come by for some time and even if you can get it, it will come at a premium (debt) or discount (equity) to what you would like to have in a more nurturing economic environment. As such, creating a “healthy” business defined by positive cash flow is paramount to survival. Being able to live off what you kill and grow for the coming months will ensure that you have a chance to thrive in the next economic boom. Moreover, you may exit the downturn with fewer competitors and a better opportunity for the “home run.”
Here are our recommendations on what you can do NOW to survive and thrive. Continue »