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What the Great Recession Can Teach Us About What’s to Come in 2021

Posted by Celene Robert to Business Advice, Startup Tips, Coronavirus

Lessons from the past


Believe it or not, 2020 is more than halfway over. It feels like we’ve lived through a decade since 2019.


Can you remember what you were doing around this time last year? What were your major priorities and projects back then?


Around this time last year, I was helping one of our clients prepare for conversations with investors. We were working diligently to get the company’s financial statements in order, ensure the books were accurate and up to date, develop the fundraising pitch, and create projections for the next 18 months. Everyone was feeling optimistic. The business had momentum, a strong value proposition, and the attention of several potential sources of capital.


After a few more months of strategizing and engaging in deep talks with investors, the company agreed to a sizable investment in exchange for equity. We began gearing up for the next stage of growth. The team was galvanized and ready to take on the future. Excitement led to a flurry of spending—new hires, new equipment, new desks and chairs. These expansions seemed a little premature to me, but they were the client’s decisions to make. Besides, the business was in good shape, and everything was going to plan…


Until suddenly, it wasn’t.


I can’t pinpoint exactly when it happened—maybe it was when states started issuing stay-at-home orders, or when the NBA season was suspended—but at some point in March 2020, everything changed. The world had entered the COVID-19 pandemic.


For our client, adjusting to this new reality was swift and painful. The investment they were counting on was reduced by 40%. Those feelings of optimism soured into regret. The business had been making decisions based on an offer that no longer existed. Not only had they sunk money into things they couldn’t afford, but they had passed up other sources of capital that were now off the table. At the same time, their line of credit shrank from $6 million to $1 million.


To Overcome the Challenges of the Future, Look to the Lessons of the Past

I’m sure countless organizations out there have similar stories. No one was ready for the COVID-19 crisis. But that doesn’t mean we can’t make it through this. Even if you made some unfortunate decisions, like our client did, there’s still opportunity to sustain and grow your business as we head into an uncertain 2021.


After all, many of us have faced similar challenges before. Remember the financial crisis of 2007 and 2008, and the recession that followed? Here’s what smart businesses did back then—and what your organization should consider doing right now.


How Businesses Made It Through the Last Economic Downturn

1. They protected their key value drivers.

To ensure your company’s survival, you need to understand your core business and do everything you can to protect it. Set aside any intangible and potential assets, and focus on the actual things that make your business viable.


What critical components need to be maintained to secure the integrity and credibility of your organization? What generates revenue? What delivers the most value to your customers, clients, or stakeholders? What’s your cash cow?


Maybe it’s a particular product or service offering, or your intellectual property, or an essential team of people. Whatever it is, funnel your energy and resources toward it. Now is probably not the time to engage in research and development, but rather to capitalize on your existing advantages in the market.


2. They made hard decisions.

A financial downturn is an emotional journey, particularly for executives and founders. Leadership has to weigh difficult decisions daily, and the best course of action is rarely clear.


Don’t try to run away from these decisions. You’ve probably had to make significant sacrifices already, and unless you’re extremely lucky, you’ll need to continue to make sacrifices. The journey ahead will be painful, but it will hurt less if you act resolutely.


That said, don’t rush ahead just to stop the bleeding. Consider the consequences and interdependencies one, two, three levels down: Would reducing pay hurt morale? Probably. But is it better than cutting staff entirely and overloading remaining employees? Will people need to be re-trained? How long will it take?


Again, there’s hardly ever a definite answer or perfect solution. Whenever possible, discuss your decisions with your advisory team to assess the potential financial and legal implications and risks.


3. They stayed flexible and nimble.

Perhaps it sounds trite, but innovation is more important than ever during a crisis.


The businesses that survived the Great Recession—and the businesses that are thriving (or as close to it) right now—are the adaptable ones. I’m referring to the distilleries that shifted their production to hand sanitizer, for example, or the travel and hospitality companies leveraging remote technology to create virtual experiences.


Consider how you can repurpose and redirect your business to make the most of this moment. Think about what kind of value you offer. Dollars are only part of the equation. It’s also about generating loyalty and positive sentiment (for instance, by giving back) and building your company’s reputation. Show people why your company matters and they’ll help sustain it.


4. They optimized their accounting and finance operations.

Save money. Spend wisely. Maintain adequate cash runway. Keep accurate records. Prepare and plan ahead.


The fundamentals of accounting and finance are integral to any business’s survival and success right now. And yet many organizations are struggling to manage it all—because they’re overwhelmed and understaffed.


This is where inDinero comes in. You can rely on us to optimize your bookkeeping and accounting, review budgets and plans, and provide the insights you need to make strategic, informed decisions. Take advantage of our outsourced CFO services to maximize the value of your business and minimize financial uncertainty at this critical moment. No matter what the future holds, we’ll work alongside you to set your business up for success in 2021 and beyond.


Discover what inDinero can do for you. Schedule a call.

About the author
“Celene

Celene Robert

Content producer by day, movie guru by night, Celene Robert is a PNW native and proud owner of eight pairs of Birkenstocks. She's passionate about giving inDinero customers a voice and enabling the dreams of innovative entrepreneurs.


Disclaimer: The inDinero blog provides general information about tax, accounting, and business-related topics. It is not intended to provide professional advice. Read more in our Terms of Use.