This is especially true of countries like the US, where it seems very simple to fire someone.
I’m a CFO of $300M company that employees ~2200 employees. We’re out of cash in 6 weeks if our revenue continues to decline. Down 30% vs last year this week (which is good compared to most). Doing layoffs and pay cuts right now. My network of CFO friends are all doing the same, many at much larger scale. Hard for me to imagine a scenario where unemployment is <20% in 2 weeks in the US if this continues.
At some point, the financial cost is too severe for the majority of us who will survive this thing. We need to just resume business and accept there is a death toll. This is war. That’s my unpopular opinion on things anyway.
I also don't quite understand how a $300M (assuming revenue, not valuation) company can run out of cash in 6 weeks. You're saying you can't make payroll in 6 weeks at the current trajectory?
When revenue collapses, as it has for many industries, your fixed costs dwarf everything else and most businesses will be in trouble.
It all has to do with how much cash you have to weather the storm. My firms investors wanted us to be cash efficient. Meaning we don’t have much of a safety net. This is the PE mindset IMO. As CFO one may think this is my decision, but really I advise to risk and the board ultimately decides.
Bigger companies who have hoarded cash since 2008 or before will survive but still lean down.
It’s possible banks will help companies like mine stay afloat. We have relationships in place and plan to pursue capital. Not sure how that will play out.
This being common or even the norm is one of the (many) fundamental problems of our current economical system.
I utterly hate that option. But I'm afraid that if we don't find a medicine which can help for the 1/5th with serve syndromes we might be going there. In both the EU and the USA.
Following is somewhat a Conspiracy Theory don't take serious:
I was even wondering if some of the delays in taking measurments around some countries was not incompetence but intentional to strike a heartless ugly balance between economical impact and people dying. But then they underestimated it waited to long and now regret it.
And yes dying people do have a hard economical impact anyway, but companies being closed of over a long time can become economically worse then even 5% of the whole population dying. Mainly because we have a messed up broken economical system which is completely incapable to gracefully handle such emergency situations :(
Of course, if $300M is VC ponzi valuation money, this was 80% fake anyways, and dependent on funny math continuing until the company caught up to the hype or exited to Someone Else's Problem, but that was the game being played. Then yes, time to cut. 2K people sucks, but like Uber employees complaining about RSU devaluation.. sucks, but you are the 1% and will ride it out.
At the same time, your top competitors are also getting ready to lobotomize, and the smaller players too. Some of their suppliers/partners are feeling it, and the customers on your market may soon be in need of someone new. So a lot of opportunity for strong co's to come out with power moves on their market, just the $ doesn't get seen for awhile. Contractions create gaps for those who don't, esp as this isn't about industries dying but temporary cash crunches.
There is so much VC/PE money out there, that this is a ripe time for them. Their q is 'where' and 'how much of a discount'. I'm obviously quarterbacking here, but similarly as your lever being firing, bank/PE/etc is spending.
My wife's a PhD microbiologist, and works at a $bigPharma, and she's not convinced that we will be back to normal any time soon.
I'm currently in an area where we are essentially in total lockdown. All non-essential shops are shut. Businesses are laying off staff everywhere. Hotels and restaurants are all closed. Borders to neighbouring countries are closed. Schools and kindergartens are closed. Even the local playgrounds are closed and taped up - try explaining that last one to your 4 year-old.
Recovery in six months' time? I'm struggling to see it.
With the huge number of small businesses collapsing, it seems unlikely that the immense numbers of newly unemployed (likely including myself) are going to be have any spare cash to drive demand when the quarantines are lifted.
The federal government is planning on sending thousands of dollars out to Americans directly.
That is in addition to unemployment, which in the currently proposed bill also provides for paid sick leave
What more do you want?
Happy debt bubble land is over, for a long time.