2020: lessons learned

Most businesses are unlikely to face conditions as hostile and the lockdowns of 2020 ever again. But the severity of the downturn – and the agility management teams have shown to survive it – can make us better prepared for a most uncertain future.

That was a key message from ABN AMRO’s virtual round table, Flexible Finance for an Uncertain World. ABN AMRO Commercial Finance UK’s head of sales Jeremy Harrison spent 40 minutes in conversation with Gareth Stanger, Group Operations Director at Recruitment Investments, and Ross McDonald, Head of Debt Advisory and Partner in Corporate Finance at BDO to discuss what business had learned from a year of lockdowns – and how they might plan for an uncertain year ahead.

Lessons from the lockdown

It’s important to remember that the Covid-19 crisis has been one of human tragedy; and that some sectors have faced an apocalyptic decline in business activity that has overwhelmed even the most talented and hard-working management teams. For many of them, the speakers stressed, little good can come from a catastrophic year.

But there are many businesses that have managed to hold on during the crisis – and even now are looking at ways to ensure they ride the recovery. “Early on we sat down as a board – as well as with our backers, and ABN AMRO Commercial Finance UK – and made a joint decision to carry on, to be acquisitive even through lockdown,” said Gareth Stanger.

Recruitment Investments continued with three acquisitions it had planned before the lockdowns in March – and accepted that the risks associated with pushing ahead were more than compensated for by the potential returns from executing its growth strategy at keener pricing. Gareth Stanger likes to quote Warren Buffet: “Be bold when others are fearful.”

Jeremy Harrison recalled meeting one business in March that immediately adapted its no-deal Brexit contingency plans for the pandemic lockdown. “That’s why management team quality goes into our rating,” he said. “Financials and assets are important, but we love to see teams who’ve been in their business for years, who know the peaks and troughs of their sector and what they can do to adapt.”

(And remember: the lessons learned during the Covid-related disruptions of 2020 might be applied to great effect after the end of the Brexit transition phase in 2021.)

“Through the summer, corporate mindsets, in a number of sectors moved on from just survival, they were increasingly focused on medium-term thinking around resilience and adapting funding to future uncertainties,” Ross McDonald said. “Then by the autumn, there were more positive transactions taking place: people have adapted their businesses to new realities and need to be able to execute their plans.”

One big tip for any business is try to avoid a hangover from 2020 – whether that’s catching up on deferred payments or managing without government support schemes. “We worked hard in the second half to ensure anything we deferred in the first half was paid off – we didn’t want that hanging over our heads in 2021,” said Gareth Stanger.

And most management teams have learned a huge amount about themselves. “Many businesses have been able to show how they weathered a once-in-a-lifetime storm and survived,” said Ross McDonald. “That’s a lot more information to share with investors and lenders: how you dealt with the crisis, how you showed our capabilities as a management team, what the lowest point looks like for your company and more.”

Keep what works

Most businesses have learned valuable lessons about their supply chains, their people’s ability to work from home, adopted new technologies at speed – and how to structure their finances to create options when the unpredictable happens.

“In our own business, we learned that we can make decisions quicker,” said Jeremy Harrison. “We’ve moved away from laborious meetings now. We’re capturing what we’ve had to do differently – and keeping it where it’s actually been better.”

At Recruitment Investments, the lesson was to hold to the strategic vision, but be open to adapting operationally in periods when visibility into the market was hard to find. But even that need to find clarity when conditions have been hostile is a lesson. “There’s a greater robustness to forecasts now at many companies, and a clear demonstration of the management team’s stamina and agility,” said Ross McDonald.

Reviewing the performance of the business through the year and consciously picking out the tactics that have worked – and taking a realistic view of where the business might be better to refocus – is best practice at the end of any year. At the end of 2020, the panellists were suggesting, it’s essential to getting ready for whatever downs – and ups – 2021 throws at us.