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The post assumes a higher importance owing to the current economic uncertainty  As we all know, the after effects of COVID 19 have slowly started surfacing and we are hearing about pay cuts, redundancies and a few other scary words in the market.

As a business, these are certainly pressing times. The economic recession has certainly put in some dents in the economic growth plans.As a startup, the additional question to consider is whether an aggressive cost cutting is feasible. However, beyond all of these, there is a certain question to consider which this quote eloquently presents

If you focus on near-term growth above all else, you miss the most important question you should be asking. Will this business still be around a decade from now

– Peter Thiel

1. Near Term Impact

In a recent post we discussed about short term vs long term decision making which impact the business growth. I suppose this is where the overall strategy plan starts taking a prominent shape.

On that note, it is really important to address what forms the short term decisions. Some touchpoint are:

1.1 Reaching quarterly target

Most companies at this stage would have probably missed out on their quarterly targets. Some of them would have revised these targets to reflect the uncertain markets scenario. Most third party expenses, consultants and temporary employments are already lost. The question still is at large as to how companies can reach their quarterly targets and annual projections. There are many ways to do that, and one of them is through performing monthly corporate expense report to help companies monitor their expenses and cut unnecessary costs to achieve the company’s target and goals.

1.2 Projections, cost cutting, redundancies

The most straightforward option seems to reduce the amount of expenses. This naturally means most new engagements are postponed until further notice. It also means that a fair few jobs are in danger considering that payroll occupies the largest expense of companies.

With the looming question of redundancies, companies are forced to put the long term hat on and think for the next 5 years instead of the immediate few months. Although redundancies can help with projections, the question still is : Will they help sustain the company in the long term?

2. Long Term Consequences

The impact of a recession is usually high in its first few years. At least the next 3 years will be a considerable struggle for businesses and people alike.

The job market will take some time to recover. Naturally businesses will need this time to see the projections and graphs take an optimistic note.

2.1 Time delays in recovery

The number of new deals will reduce for a considerable time to come. In addition, most companies would like to keep their reserves with themselves. This would leave a liquidity crunch for many small organisations.

If the question is about survival, we need to start thinking about govt loans and schemes. In addition, tax measures, incentives and govt grants are a key area of consideration.

2.2 Operational delays, challenges in finding new recruitments

Just like companies unwilling to spend, people will be unwilling to switch jobs. It is not the easiest market to find best talent in. Some companies might get lucky in the near term  with better deals. However, the question still is about optimal utilisation of these resources if there is not a lot of work to do.

2.3 IRR, EBITDA and Net Revenues

Naturally all these near term impacts directly influence the 5 year projections which are of key importance to the stakeholders. If we drop our key resources, will we still be able to achieve these goals?

In that sense, the near term questions will be of who these key resources will be. The unfortunate thing is – regardless of how good an individual’s performance has been, the decision would be at a macro level where these would play a small % of the final decision.

3. Near term consequences vs Strategy

Most of our discussions tend to focus on long term strategies, brand. At this circumstance, I am finding it fairly difficult to ignore the impact of near term influences and the direct consequences. The decision at this stage is not just about a business, growth and financial projections. It has a lot to do with individual lives.

Unfortunately, the strategy is a little more objective than that. True justice to strategy is to balance this human aspect vs a pure business view.

3.1 In line with overall business plan?

Business strategy will ask us to revisit the overall business plan and define how this near term loss has impacted us. It will also force us to think how we can make up for these losses.

The business plan in effect will change. In this situation, survival is a key component of the business plan. We have to find more than a few ways to protect the key areas and people in a business.

3.2 Cannot just be a knee jerk reaction

The biggest loss in a knee jerk reaction is the inability to revert from the impact of such a decision. The situation demands a thought beyond near term strategy into a long term vision. The vision needs to align with the overall theme and mission of the business.

Having said all the above, it is still difficult times of battle between the near term influences vs long term challenges. A business will need to incorporate all these impacts. Unfortunately, there is no right decision or an easy one at this stage.

As a business, we will be forced to make a decision, the need of the hour is to take the one which is least hurtful.

If you focus on near-term growth above all else, you miss the most important question you should be asking. Will this business still be around a decade from now

– Peter Thiel