There are six ways the current capital market crisis should change the drivers of your short and medium term operating plans.
1. Plan for increase cost and reduced availability of credit |
Retraction of debt financing is taking place against the backdrop of unprecedented capital availability globally. There are things that each company should do to survive: | |
| A. Ratchet up your ability to self fund by reducing investment in working capital. | ||
| B. Leverage healthy relationships with healthy suppliers to structure more attractive financing. | ||
| C. Build/retain credibility with investors by focusing communications on crisp, differentiated messages. |
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| D. Plan for cash needed in the next 9 to 18 months rather than just next month | ||
2. Reorient sales and marketing around the impaired economic condition of your customer base |
Capacity to buy is more unevenly distributed than at any time in recent memory. | |
| A. In B2B markets, adjust sales and marketing targeting methods to better reflect creditworthiness of customers and their own industry conditions. | ||
| B. In B2C markets, expect wildly uneven growth across regional markets and demographic segments. | ||
| C. Target customers whose ability to pay is still robust (or even increasing). Pricing, an underexploited lever in even the best of times, becomes a critical discipline as customer fortunes diverge and input prices fluctuate wildly. | ||
3. Develop a concrete response to a radically changed picture of supplier capacity and viability |
Suppliers have radically different demand for their services, and radically different levels of economic stability. | |
| A. Evaluate your suppliers’ own demand positions to help your procurement team target opportunities for advantaged pricing and service terms. | ||
| B. Understand the strength and stability of key suppliers’ financials and quickly determine where you are exposed to unhealthy levels of risk. | ||
| C. Appraise opportunities to backward integrate, as suppliers’ financial self-sufficiency is crippled. | ||
4. Ensure an "activist" response to emerging talent market opportunities |
You do no have the necessary talent in place to succeed five years from now; now is the time to aggressively close this gap. | |
| A. Launch an aggressive performance management process to create “headroom” for emerging leaders and budget room for new hires. | ||
| B. Target recruiting strategies for “not-in-play” talent. The best talent – even in the worst economic environments – is almost never out on the street. But slowing growth prospects can create rare moments of disengagement for emerging stars in prominent roles at other companies. | ||
| C. Pursue a strategy to win the hearts and minds of your own top performers. Although the labor market is softening for some employees, it is never softening for the best and the brightest. | ||
5. Balance aggressive (but small) M&A with equally aggressive due diligence |
The adage that great assets are on sale at times like these create real opportunity to set up future growth, but the potential for significant downside surprises also increases. | |
| A. Reevaluate deal pipelines for unique opportunities. | ||
| B. Ensure aggressive due diligence around financial issues and focus on key success drivers such as talent, IT and R&D – especially if this downturn lasts several quarters. | ||
6. Over invest in ethical management and tone at the top |
Difficult times often beget many more instances of less-than-perfect human behavior; counter this risk by closely managing ethical and leadership postures. | |
| A. Manage compliance programs and clarify leadership postures. Executive tone and messaging has the potential to save your company heartache, reputation damage, and outright economic loss. | ||
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