Rising While Down

These are supposedly grim days if you are a new age firm. Suddenly the world seems to have come down after an action-packed, adrenaline-boosted 2021. The world seems to be questioning almost every move that a start-up does. Particularly its capital reserve and the runway that it has for it.

So how does one deal with it? Outlining some of our commonsensical mantras we follow at OfBusiness and in our ecosystem.

1. One must turn profitable. Simply because it generates capital for the business and reduces one’s dependency on externalities, we, at OfBusiness, always advise that it’s never too late to be profitable. If one wants to be, they can be. You have to want it badly. And once you are there, its intoxicatingly habit-forming. If you are profitable in the real sense, you likely will never lose the badge. Whether it comes from better yield or cost cuts is completely contextual. And if you are already profitable, it’s time to move to the next level.

2. One must turn to debt – I’d read somewhere that a great leader is one who creates resources and not one who asks for it or manages them. This may be the time to unlock debt. Obviously, leverage creates value, particularly in these times. But for that, debt has to be an option, which typically follows profit, scale, and governance. At OfBusiness, we look for leverage even when the times are good so that they support you when the times are bad.

3. One must dial up/ down capital investments – Best time to take a critical look at investments that lock in cash and prioritize the ones that have a quicker payback (we use 2.5-3 years, post-tax). Some believe that it may change their business model, so be it.

4. One must introduce efficiency in working capital – If you can trade less working capital with lesser margins, this is the time. Especially, if the working capital is funded by equity or profits. If the working capital is funded by debt and an arbitrage is being earned between the cost of working capital and what business returns on the marginal capital (with negligible risk added), you are gold anyways.

5. One must unlock internal capital – There are several in a business that generally skip attention: deposits, advances, loans, etc. They should be cleaned up or substituted thick and fast. Seems small but sets the tone for the organization.

6. One must make it everyone’s problem – The worst is to hide the problem. All stakeholders, particularly your teammates, should know. They will help you solve.

7. One must look for inspiration – There is always someone around the corner who’s solved it for him(/her)self. Ask, learn from, and copy him/ her.

Last but not least is to believe and stay put. Good businesses survive downturns; great businesses are built-in one.

Read more from CEO speaks Column:-
– What’s in a Name?
– Once a Hosteller