CEOs, dare to make choices, even when things are going badly

Three business archetypes

One man's meat is another man's poison. A saying that is currently very much applicable. In the past crisis year, many organisations have run into problems due to government measures. But there are also businesses that are taking advantage of the circumstances and are even going public. The IT sector, for example, is doing well, but the travel, hospitality and retail sectors are suffering.

In fact, during this COVID-19 pandemic, you can distinguish three business archetypes:

• Survival

The organisation is facing major financial problems due to the COVID-19 pandemic. For example, financial restructuring is needed in order to stay afloat. The short-term focus of this type of organisation must be entirely on survival.

• Adapting to the new normal

The organisation is partially impacted by the COVID-19 pandemic and realises it needs to make changes to adapt to the new normal. The focus is on retaining value.

• Seizing opportunities

The organisation is benefiting from the COVID-19 pandemic and sees growth opportunities. The focus is on creating value.

Repayment of tax debts

Particularly for the first group, it is important to look not only at the short term, but also at the long term. No matter how difficult that may be at present. Many of these companies use the government measure 'Special postponement of payment due to the COVID-19 crisis'. But there’s a catch to it. Unlike, for example, the NOW or the TVL emergency schemes, this measure is not a subsidy. The businesses that use it have to repay the unpaid taxes at some point. The question is whether in other economic circumstances they would be able to repay the accumulated debts.

According to the PwC and Leiden University Non-performing Loans Barometer, the influx in non-performing loans will in any event increase in the next quarter. According to the expert panel, the main reason is that organisations cannot meet their payment or repayment obligations to the Tax and Customs Administration and their bank. If the company has more value as a going concern than in the event of bankruptcy, debt restructuring seems a prudent choice from a business and social perspective. This is an important challenge for the Tax and Customs Administration in particular as the new financier of entrepreneurial Netherlands. If we don't succeed, many of the support measures will have been a waste of money and many businesses will go bankrupt unnecessarily.

Two important aspects to you as CEO

In addition to the daily focus on liquidity, two aspects are now important to you as CEO or director and major shareholder:

• Make a timely start with an information platform

In crisis situations, having an information platform is crucial to be able to inform the stakeholders concerned fully and on time and to include them in proposals for restructuring. In addition to generic information about the business, an information platform consists of a problem analysis, financial scenarios and a substantiated request for financing.

Organisations often underestimate the time it takes to set up a good information platform. Not having this information may prevent the stakeholders involved from taking a decision or even from cooperating in finding a solution. As a result, there may be too few options left to prevent bankruptcy. In short, an information platform is crucial in these uncertain times to be able to act quickly.

• Create urgency for change

This also applies to organisations that are currently successful. They would do well to realise that this may be the calm before the storm. Therefore, create urgency for cost reduction, improvement of existing business activities and strategy change. Research shows that entrepreneurs who bring the urgency of change to the fore, and therefore engage in proactive change management, have the greatest chance of survival. So embrace change.