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People keep saying “recession” but that sounds like they don’t understand the implications of what’s happening to the world economy right now. “Global depressio

People keep saying “recession” but that sounds like they don’t understand the implications of what’s happening to the world economy right now. “Global depression” seems like a more appropriate term but time will tell. 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.

Rafuino 7y ago
Yeah, resuming business and being OK with the death toll is certainly an unpopular opinion. If you have hospitals overwhelmed because business just has to continue, business will suffer regardless. 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?
- pvarangot 7y ago
  I've seen and worked for companies in that situation, you have a 200/300M valuation on the bull market but you are running out of cash and expecting to get a new round based on great growth numbers or achieved goals. When I was there we got the round and were saved, but I can see that not happening in the current situation.
- mercutio2 7y ago
  Neither valuation (which I assume was what they meant) nor revenue tells you much about a formerly-growing company's fixed costs or its reserves. Rapidly growing companies frequently have very limited reserves. When revenue collapses, as it has for many industries, your fixed costs dwarf everything else and most businesses will be in trouble.
  - conductr 7y ago
    Bingo. Our whole business was debt fueled M&A. So opex along with interest are big nuts. Shoveled every dollar back to M&A not much safety net.
- conductr 7y ago
  Businesses suffering usually effects investors more than employees. This is different. 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.
  - dathinab 7y ago
    > My firms investors wanted us to be cash efficient. Meaning we don’t have much of a safety net. This being common or even the norm is one of the (many) fundamental problems of our current economical system.
- daxorid 7y ago
  This is one of the consequences of the modern obsession with "reach for yield" or growth at any cost. Everyone feels pressure to put every single dollar "to work", because everyone else is. It's an extremely fragile modus operandi, but managers would get fired for underperforming their peers if they didn't do it, so the incentive structure guaranteed the result.
avalys 7y ago
So you’re saying your company has only enough cash on hand to cover 2 weeks of operating expenses?
- conductr 7y ago
  Roughly. In a scenario where revenue is 0 and opex is fixed
dathinab 7y ago
> 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 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 :(
jbkiv 7y ago
Thank you. No this is not an unpopular opinion. yes, global depression. Veteran of dot com crash here. You are spot on. I can't believe that some folks still don't realize what is happening.
lmeyerov 7y ago
Sell some stock and come out stronger than competitors. Lobotomizing hurts more if you're good. If you can't, well, that says a lot about the owners and company when push comes to shove. Not the narrative, but fundamentals. 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.
- conductr 7y ago
  I'm not sure how this will play out yet. But even with good fundamentals; we're in a traditional industry and business model not a startup and not software. Just active in an industry consolidation thus M&A. Very predictable revenue and growth rates before now. Question are 1) for current investors, do they want to infuse more cash to avoid the total loss 2) market is crazy so who wants to invest? terms? timing? 3) how do we do it without busting our current covenants. We could probably normally sort through these but not with this time bomb stuck to our chest.
  - lmeyerov 7y ago
    The time thing is def hard, and I empathize with employees being both a responsibility yet the no-one-blames-you lever everyone expects right now. 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.

Rafuino 7y ago

Yeah, resuming business and being OK with the death toll is certainly an unpopular opinion. If you have hospitals overwhelmed because business just has to continue, business will suffer regardless. 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?

pvarangot 7y ago
I've seen and worked for companies in that situation, you have a 200/300M valuation on the bull market but you are running out of cash and expecting to get a new round based on great growth numbers or achieved goals. When I was there we got the round and were saved, but I can see that not happening in the current situation.
mercutio2 7y ago
Neither valuation (which I assume was what they meant) nor revenue tells you much about a formerly-growing company's fixed costs or its reserves. Rapidly growing companies frequently have very limited reserves. When revenue collapses, as it has for many industries, your fixed costs dwarf everything else and most businesses will be in trouble.
- conductr 7y ago
  Bingo. Our whole business was debt fueled M&A. So opex along with interest are big nuts. Shoveled every dollar back to M&A not much safety net.
conductr 7y ago
Businesses suffering usually effects investors more than employees. This is different. 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.
- dathinab 7y ago
  > My firms investors wanted us to be cash efficient. Meaning we don’t have much of a safety net. This being common or even the norm is one of the (many) fundamental problems of our current economical system.
daxorid 7y ago
This is one of the consequences of the modern obsession with "reach for yield" or growth at any cost. Everyone feels pressure to put every single dollar "to work", because everyone else is. It's an extremely fragile modus operandi, but managers would get fired for underperforming their peers if they didn't do it, so the incentive structure guaranteed the result.

avalys 7y ago

So you’re saying your company has only enough cash on hand to cover 2 weeks of operating expenses?

conductr 7y ago
Roughly. In a scenario where revenue is 0 and opex is fixed

dathinab 7y ago

> 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 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 :(

jbkiv 7y ago

Thank you. No this is not an unpopular opinion. yes, global depression. Veteran of dot com crash here. You are spot on. I can't believe that some folks still don't realize what is happening.

lmeyerov 7y ago

Sell some stock and come out stronger than competitors. Lobotomizing hurts more if you're good. If you can't, well, that says a lot about the owners and company when push comes to shove. Not the narrative, but fundamentals. 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.

conductr 7y ago
I'm not sure how this will play out yet. But even with good fundamentals; we're in a traditional industry and business model not a startup and not software. Just active in an industry consolidation thus M&A. Very predictable revenue and growth rates before now. Question are 1) for current investors, do they want to infuse more cash to avoid the total loss 2) market is crazy so who wants to invest? terms? timing? 3) how do we do it without busting our current covenants. We could probably normally sort through these but not with this time bomb stuck to our chest.
- lmeyerov 7y ago
  The time thing is def hard, and I empathize with employees being both a responsibility yet the no-one-blames-you lever everyone expects right now. 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.