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Maybe it’s time to shoot the wounded
The proposed government bailout is going to provide a lifeline to many companies that would otherwise be profitable. But to so many unprofitable, undeserving startups, it’s a waste of financial oxygen.
13-Apr-20 – On Wall Street, the saying is “catching a falling knife,” a process that always seems to end up with you getting stuck. Market tops and bottoms have always been impossible to predict, and fashion trends aren’t much easier to forecast, although today in Zoomland it’s a pretty safe bet that there are a lot more tops than bottoms. In Limbo competitions, and in collapsing markets, it’s a question of agility and flexibility and determining (or trying to guess) just “how low things can go,” whether your knees and your company’s needs can take the stress and the pain, and whether there’s any reasonable end in sight other than landing flat on your back on the floor. Today, thousands of businesses – especially those less than two years old – are facing their own variations of these dilemmas as they try to decide just how deep the immediate cuts they need to make in their overhead, headcount, real estate commitments, and other fixed costs will be. It’s abundantly clear that waiting (as the Trump team has sadly demonstrated) never gets you to a better result in critical times. For those companies that want to survive and thrive when the dust finally settles, deep and aggressive moves are essential. If you try to make small and piecemeal workforce reductions and furloughs, the “slicing the salami” approach, even if you save the business, you’ll kill the morale as well as whatever trust and confidence in you and your management team the remaining workforce used to have. Millions of other “new” businesses – especially those that are venture-backed – are rushing to draw down their lines of credit before the banks wake up and realize that, in too many cases to count, they’re dealing with companies that looked pretty good on March 31 in their Q1 (pre-virus) results, but are now the walking dead.
In the Great Recession, it was called “extend and pretend.” It’s hard to say what nobody wants to hear. Tens of millions of other large and small businesses in serious financial trouble are rushing to apply for the various ill-defined, under-manned, and otherwise inscrutable government bailout programs and they too barely understand what they’re signing up for, or what the longer-term consequences will be. So far, for the majority of the most critical applicants, we’re looking at short-term and short-dollar band-aids that won’t fix anything structurally or do much beyond postponing for a few weeks the ultimate pain. Take the money, prop up the business for another month or so, keep your people on the payroll, and pray. And so, the rush is on. The most prevalent commentary (and the poorest advice around for startups) from investors, accountants, advisors and, of course, from every politician, is to go for it, ask for as much as you can, do it yesterday, and hope that the spigot doesn’t run out before your turn comes around. Maybe Trump’s “miracle” is right around the corner right along with the Easter Bunny. The real problem with temporary fixes and makeshift solutions is that, in many cases, they obscure and often hide the fundamental sources and problems facing so many of the failing businesses and they keep them and us from addressing the root causes and the core issues. Even more importantly, by trying to “save” every business and spreading the peanut butter so thin, we’re doomed to do too little for the many and not enough for the businesses we really need to focus on supporting and saving. But, of course, that’s how self-serving politicians do these things. Pennies from heaven rather than hard facts and tough choices. The facts are that there are way too many businesses in trouble and way too few funds being allocated to help them.
Giving them a month’s grace instead of a reality check and some really tough love isn’t doing them or the economy a service. It’s like how a drunk uses a lamppost – for support, not illumination. Someone needs to tell these people the truth and soon. I’m not talking about trains and planes with no passengers, hotels and motels with no guests, or theaters and plays with no patrons. They’ll be back in a while and we need to do whatever it takes to get them through the crisis and support their employees as well. I’m talking about the thousands of young entrepreneurs who started their businesses in the glow of the greatest market run-up in the last century or so when investors couldn’t shovel their dough quickly enough into anything that looked like the “next” whatever, whether it made any sense or not. These businesses are a waste of oxygen, scarce resources, and the limited available assistance from the government. Instead of fruitlessly continuing to pump water from their sinking ships – with or without state or federal funding – they need to do us all a favor, pack it in and get a day job if they can.
By Howard Tullman | Loop North News | h@g2t3v.com
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