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Wartime CEO Part 2

On April 24 we sent a note to clients called "Wartime CEO." The title was in reference to the term used by Ben Horowitz in his book "The Hard Thing About Hard Things" in which he makes the critical distinction between a peacetime CEO and a wartime CEO. The distinction, of course, is about what gets prioritized and how things get done.

Every business owner we work with switched to Wartime Mode in March. While the daily leadership team meetings in the (virtual) war room may no longer be necessary, many owners are still in Wartime Mode. And rightly so:

  • Homebase provides scheduling/communication/HR/compliance software for small business and has over 60,000 small business customers with more than 1M active hourly employees. Homebase aggregates all the activity data to develop a picture of the small business economy. Activity levels in July stagnated and were still 20-25% below February levels.

  • Economic information provider, Real Economy, notes that the current U.S. infection rate of approximately 63,000 cases per day is twice the peak rate seen in April and will likely take several months to dissipate.

  • Mauldin Economics notes that headline unemployment numbers are likely misleading. Count up those with continued claims for state unemployment and you get to about 10% total unemployed (which is in line with the current headline number). But add in those with continued claims on federal unemployment programs and the figure quickly approaches 20%. Add in those that don't qualify for unemployment benefits or who are "off the books" and you're talking about total unemployed north of 20%.

  • Investment bank Lazard publishes an annual survey of healthcare industry leaders. This year's survey of 221 healthcare executives and investors was conducted in May and June, and included this question: "when will a vaccine be widely available?" Almost 75% of respondents estimated that such a vaccine will be widely available in the second half of 2021 or later (see report p.9).

What to make of all that?

What mattered in April still matters today. That is:

1. Resiliency - to bet the farm on a widely available vaccine is to ignore the odds. We have no problem with bold bets, but we prefer to make them when the odds are stacked in our favor. Review cash, working capital, people, customers and markets, capital plans, capital structure…where can you make a move to improve resiliency?

2. Scenario planning - if demand remains 30-40% below February levels, can you survive for 6 months? 12 months? What if demand improves sooner - how could you respond to that scenario?

3. Beat the fatigue - if you haven't taken a week off over the summer then get it on your calendar now and go do it. Give yourself a chance to recharge. Just because you're in Wartime Mode doesn't mean you have to run yourself into the ground. Watching you crash and burn helps no one on your team.

Some industries are in a depression. And a depression is a war, a battle for survival. It is intense; the outcome is unknown; and the duration is unpredictable. Building resiliency, planning for uncertainty, and recharging when possible, just might give us a chance to win.


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