IT'S TIME TO START PLAYING OFFENSE
During a crisis, entrepreneurs are often advised to “play defense”. Cutting costs, preserving capital, lengthening the “runway” are the order of the day. But real life is not so simple. In reality, good entrepreneurs have to play both offense and defense, capitalising on opportunities and avoiding risks at the same time, often within the same day. Gigi Levy-Weiss from venture firm NFX shares some useful advice on how and when to “start playing offense”.
Experienced business owners will find that this principle resonates deeply. Managing a business well means constantly doing both risk mitigation and opportunity exploitation, at the same time. Crises just increase the magnitude of both risk and opportunity. For many entrepreneurs the current COVID-19 pandemic is not their first crisis, and they remember the opportunities they capitalised on (and perhaps some they missed), last time. These entrepreneurs have been attuned to the potential to find opportunity in this crisis since the beginning.
Levy-Weiss argues that for many businesses, now is the time to start playing offense and investing in opportunities while others are still playing defense. Business owners must still wear “both hats”, but his article deals with some opportunities to “win”, in addition to the important steps business owners are taking to “not lose”.
In no setting is this more relevant than mergers & acquisitions: the arena with the greatest potential for value creation in business. Savvy entrepreneurs are recognising an unprecedented opportunity to grow through acquisition, with government-backed financing for acquisitions in the UK and the United States. Unlike mere bargain hunters (amateurs who enter the market to compete with each other for mythical opportunities), experienced entrepreneurs and investors know that they can acquire good businesses at slightly reduced prices, while accessing capital at incredibly low rates. “Playing offense” in their M&A strategy during the current crisis can add more long-term value to their businesses than perhaps any other business function can.
For business owners who are ready to sell, the COVID-19 pandemic has strengthened their resolve. Rather than waiting for a white knight investor to swoop in one day and make an offer they can’t refuse, they realise that if they are going to sell, they must do so proactively. They must do what is required to let serious buyers know they are interested in selling. While being realistic about price, they don’t have to sell at a huge discount - good assets will still be good assets after COVID, and serious investors know this. For these sellers, the crisis is merely the catalyst to them finally pulling the trigger on a sale that they had been considering for years, and it could also be their best opportunity to sell in a long time.
“While being realistic about price, they don’t have to sell at a huge discount - good assets will still be good assets after COVID, and serious investors know this.”
For other business owners playing offense will mean taking opportunities to grow their business now, with a view to selling a larger or more profitable asset later. While still playing some defense, they will look for ways to expand into new markets, to capitalise on lower costs in some areas (finance, advertising, raw materials) and potentially even look for small acquisitions of their own.
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