03 May Scale up on time or miss out on post-coronavirus opportunities
Scale up on time or miss out on post-coronavirus opportunities
3 May, 2020
The coronavirus crisis might not be over yet, but some organisations are already starting to feel the ‘pain’ of the upcoming economic recovery. These include early-cycle companies in the electronics and car sectors. Companies in these sectors are already running into difficulties with their preparations for an improvement in demand. The lesson to be learned here: scale up on time or miss out on post-coronavirus opportunities!
Reduce costs to survive
At the start of the coronavirus crisis, many companies responded by reducing their costs. No surprise there. They chose to cut back on material and staff costs in particular, a move that met with the approval of shareholders and banks. Their support was important, as companies will find it impossible to stay afloat in difficult times without it. The same applies for creditors: a company will only be able to continue to supply customers and obtain prefinance if creditors have confidence in its crisis plans and perspective.
From crisis plan to recovery plan
During the coronavirus crisis, survival was – and still is – the main priority. However, the time has now come to shift attention to the future, to a time when the coronavirus pandemic is over. When government support measures are withdrawn, companies will need to ensure that they have new financing in place. With this in mind, a crisis plan should always be followed up with a recovery plan. As the economy improves, rules will very quickly start to change too. Instead of cutting back, you will need to invest in employees, working stock and marketing. This will require new working capital and proper planning. The longer the turnaround time for the provision of products or services, the more likely that investments and financing will be necessary. So, make sure that your recovery plan is in place on time.
Keep banks and suppliers in the loop
As a company restarting after the coronavirus crisis, you will need additional financing. However, your figures for the previous year and the pre-coronavirus market conditions will not be in your favour. Hopefully, you will have kept in touch with crucial suppliers and financiers as they will be indispensable for your achievement of a good recovery plan. So, keep them in the loop! Financiers can tell you which extra information they need and how much they are willing to invest. Suppliers will keep you up-to-date on any planning or delivery bottlenecks they expect. So, make suppliers your business partners rather than just cost items.
Don’t let any post-coronavirus opportunities slip through your fingers
Car makers are currently experiencing the effects that their decisions have had on suppliers. They rely heavily on microchips for the technology they build into their products, but cancelled all their orders for these products when the coronavirus crisis started. The consequence? With the economy now improving, car makers are at the back of the queue with chip producers. This proves the importance of a good recovery plan. Be sure to keep lines of communication open with the Dutch Tax and Customs Administration, banks and suppliers too. This will avoid you becoming the victim of a scarcity of your own making and missing out on major post-coronavirus opportunities as a result.
This blog was written by Georges de Méris, Forensics & Recovery partner. You can contact him by telephone on +31 (0)40 240 9476 or by e-mail on firstname.lastname@example.org.