Recession resilience: what you should know and what you can control
As mid-market investors and management teams steel themselves for the coming downturn, it’s essential to know where to invest precious time and resources.
What are the key areas that companies and their investors should be paying close attention to today and where can they create value over the quarter and next 12 months?
Start by asking questions about…
Management team: you need to be confident that your leadership have the right skills, that they are aligned behind a compelling strategy and they have a coherent plan for delivery.
To find out what leadership profile is required for periods of uncertainty, read our recent interview with General Sir Peter Wall
Costs: be clear about how your input costs will be impacted by inflation and a weak pound.
Cash: ensure you understand your cash requirement in granular detail. Run scenarios that allow for changes in input costs, GBP value and debt servicing costs.
Create value by…
Customers: get even closer to your customers to understand how they’re impacted; this will help you avoid value-eroding surprises and keep you one step ahead of your competition. Find out more about Voice of the customer.
Nimble: make sure your management systems are giving management and investors the information needed to make good decisions rapidly, and that helps identify which levers to pull.
Price: increases will rapidly become tougher. Reviews of pricing architecture should consider quality of earnings (i.e. replicability) as much as quantum. There will be opportunities to move customers sideways onto higher quality earning streams, make the most of them.
Look out for our Q&A with Tim Ham from Pearson Ham which will be published soon. Sign up here
Critical friend: The next few months are going to be tough, so it’s best to be forewarned of issues, plan for them and minimise risks. Asking for advice from an honest, critical friend can make you aware of issues before they happen.
Please speak to me or a member of the Armstrong team if you’d like to discuss how to guide your business and portfolios through the coming downturn.
Tom Raymond, Chair