Are You Prepared?
Updated: May 12
Now is the time for companies to know their Plan A, but also make sure they have a Plan B...
What are we seeing in the markets?
2021 was a year of record growth and we saw a huge uptick in the number of companies both entering the sales market as well as closing deals. X1 Consulting supported several transactions and integrations as some of our customers looked to grow their holdings through acquisition. We experienced the feeding frenzy of companies looking to grow as well as those looking to capitalize during a hot market.
However, beginning in late Q2 2021, we began to see early indicators of investors and owners planning for the potential storms ahead. They began battening down hatches, tightening belts, freezing positions, downsizing and adopting a "hold tight" mentality. There were a number of companies looking to expedite their sales and activity ramped up prior to year end, but we've seen a significant decline in activity through the first part of 2022.
"Venture-backed exit value in the US reached $33.6 billion in the first three months of 2022, marking an 82.5% collapse from the previous quarter" - PitchBook-NVCA Venture Monitor
What can you be doing?
At the moment, there are still transactions to be supported and deals to be made, albeit at a much slower pace. It's clear that the focus for most owners should be to optimize their holdings and determine how to control costs, improve operations, and otherwise anticipate how economic downturn might affect their companies.
Assess and Baseline Your Current Environment
With most of the clients we work with and the companies we see - few have clearly defined and documented strategies for operations and IT. Now is the time to assess where your company is at and how you are positioned. You need to identify and call out your weaknesses, and ensure that you are addressing the potential risks you may face in the months and years to come.
Are you clear on your spend in IT or overlapping operations? Do you have a clearly articulated strategy that aligns to both the fiscal and operational goals for the business? Do you have the resources and budget to support this strategy? Do you have the proper insight and comparable benchmarks to ground your plans? Do your IT agreements have the flexibility you need as your company faces changes?
Plan for Success as Well as Contingency
Now is the time to identify where you are headed for an optimal, growth-oriented future state. Have you fully integrated any prior acquisitions? Do you have the proper headcount and/or service partners to adequately see you through turbulent waters ahead - or do you still have gaps that you're struggling to fill, based on the competitive hiring landscape that we've seen in the past 24 months?
You need an ideal plan - call it "Plan A" - where you've called out key milestones and internal advancement of your IT and operations functions. This is the strategy that allows your team to invest in improvements, best practices and seize other opportunities to support company growth. This is the plan that looks to optimize what you have and fully integrate those functions and operations that may be disparate today.
However, given the uncertain forecast ahead, companies also need to understand their contingency options - their Plan B. This is the plan that calls out opportunities for downsizing, reduction in spend, and identifies those projects and functions that can be held off during challenging fiscal times. This is the "keep the lights on" plan to ensure continuity of business operations and protection of data - while foregoing optional improvements or nice-to-have functions.
Balance Resources to Execute Your Plans
Once your have your plans in place - it is essential that your leadership team agrees and commits to what is required to execute successfully. This can mean adequately resourcing and allocating funds required for optimization, integration or growth. This can also mean making the harder decisions to re-adjust headcount, defer improvement projects, reduce spend or accept increased risk while your company decides to ride out the storms ahead.
How Can We Help?
At X1, we have been through the ups-and-downs with various clients - from growth and mergers, to recession and bankruptcy. Whether your company requires an objective assessment, needs a clear strategy, or you know your direction but need help in getting to your desired end state - we are always happy to connect and discuss your specific situation and determine how we can assist.
Why are stocks so shaky?
The Covid recession of early 2020 was the shortest U.S. recession on record. The question now is how long the post-Covid economic rebound can last—and whether we might even be heading for another recession.