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Tuesday, October 27, 2020

Business Transformation

Investors Are Willing to Bet on Companies Surviving COVID-19

While COVID-19 brings the world economy to its knees, many companies are finding capital is relatively easy to acquire. Companies that acted quickly to rethink their operational plan and remobilize employees to work from home models for the purpose of increasing earnings have proven to investors that the company can take a punch, adapt and move forward – which ultimately is what investors want.

Investors are looking for companies that can post positive cash flows and earnings in the midst of a pandemic and recession. These are the companies that will survive anything, and that’s where investors will be willing to invest in such a tumultuous and uncertain long-term future.

Investors remain confident in the U.S. economy’s fundamentals by forging ahead with expansive plans for long-term growth, perceiving COVID only as a short-term economic dampener. The positive outlook has provided many of my clients with enough runway to survive a lengthy pandemic as long as the company is proactive in adapting new operations, and is on-course to produce profits for the long-term.

I took on a CEO role in a turn-around of a health insurance company during COVID. We turned the business around and increased earnings substantially by converting to a remote work operation. Building and managing teams with remote technology was critical to the company’s long-term success and profitability. While products, services and costs changed considerably, moving company operations online as quickly as possible was the most consequential challenge we faced. Now, the insurance company is experiencing positive cashflow with a far-more profitable future and investors are much more likely to invest.

Similarly, our recent manufacturing client needed to fully scale back operations until it was safe for employees to return to work. We notified all customers of a backlog in production until we were confident in our ability to keep employees safe, and we developed a plan to safely return to full production. The business model changed from operating at max capacity and efficiency to producing just enough to earn a positive cash flow. Now, the company is scaling up to fill more orders and is on a long-term path of profitability.

Each CEO should evaluate their business models by asking themselves what growth pattern their business is in. Every company in any industry – from health insurance, manufacturing, real estate and restaurants – has faced a reckoning about their business model and whether it needs to be tweaked or changed completely to maintain profitability.

Of course, no CEO can predict the future, particularly one involving a pandemic. My advice: approach the business plan from a holistic perspective and evaluate which investments and assets can be reallocated to achieve profitability, create contingency plans for scaling to full or minimal operations, prepare to make tough decisions, and – most importantly – proactively reassure your customers and employees.

Many B2C companies have done a phenomenal job at reassuring customers they take the virus and their customer’s health seriously, compounding customer trust in the brand. Hotel brands place “disinfected” signs on all room doors after cleaning each room. Many airlines hand out sanitizing wipes for customers boarding flights. Manufacturers slowing production for employee safety shows customers the operational reliability of your production process.

As you remobilize employees, use this as an opportunity to streamline work flow and shift internal operational priorities. What technology are employees relying on and what aren’t they using? What IT projects should be reprioritized or frozen based on a decline in short-term revenue? Are employees just as productive using videoconferencing technologies? Can you increase the speed of decision making?

The most important thing a CEO can do for the viability of their company today is to solidify operational capabilities in preparing for an uncertain future. Not only will the company be better insulated from extraneous market shocks, but future investors will want to see how quickly the company reacted to maintain operations.

A holistic approach to restructuring your company is no easy feat, but it’s no wonder 77% of CEOs are more focused on the company’s stakeholder view of the business, according to Marketplace.org. The public health crisis is forcing leaders to redefine company values and purpose to safeguard employees and customer relationships, all while ensuring the business remains profitable today and for the long-term.


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Joseph Safina
Joseph Safina, Founder and CEO of Safina Asset Management, an "all stage" investment firm raising capital for businesses, enhancing performance and maximizing value. Joe's 30 years of investment experience started when he sold his first company at age 25 and now manages billions for public and privately held small and mid-cap companies. Joe was profiled as a top ten Banker in R.J. Shook's "The Winner's Circle," and specializes in health care, banking, financial management, M&A, and more. Joseph Safina is an opinion columnist for the CEOWORLD magazine. Follow him on LinkedIn.