Opportunities for Businesses in the Time of Covid-19

Covid-19 was already on the radar of many businesses in February, especially those with operations in countries already affected and beginning to shut down.  Companies began to see an impact on their sales from European and Asian regions and also to experience delays in deliveries of key products and materials from those geographies.  While management teams scrambled to understand and deal with these issues, a much bigger question loomed about what would happen if the virus reached the US.  It was a something that seemed so unfathomable that preparing for it seemed silly.

When the inevitable spread of the virus to US soil started, government at all levels announced guidance and restrictions that brought almost all business activity to a complete halt.  Almost immediately too, changes appeared in the business landscape, as some companies were restricted from selling their primary product or service, while the others found it difficult to connect with customers, secure parts, deliver, or service their products.

The order of magnitude of the blow and the speed with which it was delivered stunned most management teams. Some of the effects are temporary, but some will have a lasting impact on behavior and business patterns—a “new normal.”  While many challenges will appear as a result of these changes, opportunities do exist in both the short-term and in the long-term.  Leadership teams need the wherewithal to think and act tactically in the short-term, while maintaining the foresight and flexibility to envision and execute for the longer-term.

There is no “pandemic playbook“ to which leaders can refer for answers. But, one can begin to develop those answers by using two questions to frame solutions: How do I survive or maybe thrive in this shutdown?  How do I prepare for my customers needs of the future?

Most companies are working to survive the sudden business fallout from the restrictions imposed globally.  And, that starts with developing a thorough understanding of the company’s access to liquidity and a view as to how long it can operate under the most draconian of revenue scenarios.  The longer this time period lasts, the more space the firm’s management has to use a more strategic lens on the whole situation.

Subsequently, a company can consider other alternatives for securing capital through its traditional financing sources and to explore applicability to tap government programs or other inexpensive sources of capital.  Finally, it can re-consider its working capital management—focusing on taking advantage of any payment deferral opportunities while increasing focus on collections.

Once armed with an adequate approach to capital availability and management, a company can turn towards developing alternative scenarios for the length of the general downturn and feasible recovery alternatives.  This helps guide considerations of how it might continue to provide its products and solutions and how best to align its cost structure to these opportunities.  The decisions that a company makes at this time about its employees and its key development programs have the potential to affect long-term viability.  So, great care should be taken in selecting and prioritizing areas for action.  Where it can, a company can furlough critical employees and potentially qualify for additional financial support.  Most importantly, company management should develop and execute a gradual, milestone, or KPI-based approach to its cost actions, so that it can quickly address any continuing deterioration in its business while not impairing its long-term potential.

A few companies will quickly see the positive effects of restrictions and a new work environment.  Unexpectedly, demand for those solutions rises dramatically.  In this case, the short-term actions are less focused on capital structure liquidity and more on working capital management and accelerating customer acquisition and securing long-term relationships now.

Either way, leadership teams are receiving and processing an extraordinary amount of external and internal information that they evaluate and put into action. Financially, a company that aggressively secured liquidity and undertook short-term measures will need to address some of those measures in the mid- to long-term, adding to the execution complexity.  While working capital and liquidity management may not deteriorate per se, any deferrals or special program financing assistance secured earlier eventually requires repayment.

Strategically, the pandemic will introduce lasting changes in buying behaviors and preferences, to which companies will have to align in the long-term.  Some companies will have seen these changes more quickly than others.  With one eye on the short-term situation, a company also should carefully study market changes and look to align its solutions to better address requirements in the  “new normal.”   Those considerations start with understanding nature of the end market  and to what degree it will require human interaction to sell and deliver a product.  It’s likely that companies will need to manage hybrid work environments to undertake all activities.

A company’s readiness, from its technology infrastructure, best practices, and culture perspective is a major determinant of its ability to compete, as well as the financial footing under which it operates.  A company with an otherwise healthy short-term financial posture may not be able to successfully unwind obligations and aggressively invest to address the changing long-term requirements, unless it maintains a constant and open dialogue about financial and operational priorities.

Over the coming weeks and months we’ll get a better sense of what actions and practices best allow companies to weather this particular storm and come out stronger on the other side.


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Elias Mendoza
Elias Mendoza
Elias Mendoza is Partner & Chief Operating Officer at Siris Capital, Corporation. In addition to COO, Elias’ responsibilities at Siris include identifying and evaluating trends within existing and potential industry verticals for investment opportunities, and assisting our Executive Partners in evaluating underlying business strategies of targeted companies and existing portfolio companies. Prior to joining Siris, he was a Partner at Union Square Advisors, where he served as its Chief Operating Officer and a senior banker across the firm’s verticals. Through July 2011, Elias held various senior positions at IBM, including Vice President and Global Head of Corporate Development. In such capacity, he was responsible for identifying , executing and integrating all acquisitions, investments and divestitures for the company on a worldwide basis. Elias’ previous experience includes over twelve years spent at Morgan Stanley & Co., most recently as an Executive Director in the Investment Banking Division. He received a Landegger Program Certificate in International Business Diplomacy and an MBA from Georgetown University. He received his AB from Princeton University.

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