How Tech Companies Can Survive This Recession
The business environment for 2009 looks bleak. Financing came to a screeching halt in the late summer of 2008 and capital markets are still reticent on extending credit. What is an enterprise to do? As Bryan Stolle, partner with Mohr Davidow, points out in his article How to Survive - and Thrive, the key is first to survive by assessing the environment, creating a plan, and executing. Once the economic recovery begins, your company must have differentiated itself from the other companies in its market-space.
Stolle presents a list of 10 tips for the tech CEO of today. As he states, some are obvious. I will try to summarize his action plan below, but for the full impact I strongly suggest you read his article:
1. Question every expenditure: If it does not fit into the “Must Have” category, then it should be cut. Does the spend positively affect the bottom line? Examine R&D with an emphasis on return on investment and its ability to differentiate your products from your competitors.
2. Everyone is a salesman: All employees must focus on acquiring new customers and maintaining the current customer base. All top executives, CEO included, need to be in the field or on the phones.
3. Mirror your customer’s mantra – cut costs: Your sales pitch must state how much your solution will “CUT COSTS”. Your customers won’t be listening to anything else.
4. Increase your marketing efforts: The more spent in this area will help your customers to focus their spend prioritizing on your application, the sales process is enhanced, and competitors will be forced to compete or leave the market.
5. Refocus your distribution strategy: The search for new channel partners and resellers is a drain on cash. Funnel your cash into the proven channels and leave the marginal producers for later.
6. Cut headcount – but do it fairly: In my career I have seen enough of the “Trim the Fat” executives as it relates to personnel and I know the devastating affects it has on the individual, on his/her family, and on company morale. Stolle also recognizes the need to maintain and “nurture the esprit de corps - not kill it” and advises to give full consideration to the corporate culture.
7. A good time to hire: As a counter-balance to point 6 above, this may be the time to upgrade your team. Top-performers in other companies may be getting a bit nervous with their current position in light of the current economic climate. If offered the right package, these top performers would be happy to join your team.
8. Reexamine the operation and consider a new approach: Take this opportunity to rethink how the company works. Perhaps an outside observer can suggest a new approach and re-energize the operation.
9. We are a global economy: Since the internet and global supply chains and global service providers allow us to sell our products and services anywhere in the world, then take advantage of this fact. Stolle suggest that you find a market that is healthier than the US and Europe and determine if you can sell at or below our current market costs. If so, then do so.
10. Reject the urge to merge: In the current economy, the chances are both companies will fail. Two struggling companies seldom create one strong enterprise.
Stolle’s concluding remarks are right on point and I couldn’t say them better. He concludes by saying:
“Whether all, or just some, of the above apply to you, to make it through these “interesting times”, you must a) be very sober and realistic about valuations if you must raise capital, b) treat every dollar as if it’s your last to avoid having to raise more capital, and c) lead, lead, lead!
Lead with a vision of how your company will be a winner despite the tough times; lead with a plan that will deliver on that vision and is credible and inspires trust and confidence; lead with execution from the front (as in constantly in front of customers and employees), hammering the vision, the plan for success, and the results.”
