Business owners who can keep their companies afloat during a global pandemic will be quite attractive to investors when the economy begins to grow again, says R. Louis Schneeberger, executive chairman of Proformex.
“Is your product or service selling right now?” Schneeberger says. “That shows you have some stickiness, that people need what you do. You’re not a nice-to-have. You’re a need-to-have. Investors are going to look at those companies and say, ‘This is a company that’s going to be around no matter what.’”
Now is the time to focus on profitability rather than revenue growth, says Schneeberger. Demonstrate the strength of your business and you’ll put yourself in a better position to make a deal when the opportunity arises.
Schneeberger spoke with the Smart Business Dealmakers podcast about how investors view the current business climate and some of the dynamics that could shape dealmaking in the post-pandemic economy. Below are excerpts from that conversation.
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Has the COVID-19 pandemic given investors such as yourself pause as to where you’re making plays in the market?
Definitely. I think me as an investor, or other investors that I talk to, they’re certainly hanging on right now. As you look out in the near term, it’s as opaque as it’s ever been. You look out three months, six months from now, and nobody’s ever been through this before. So what’s it going to look like? Because there is so much uncertainty, I just don’t think you're going to see as many deals, or anywhere near the number of deals you normally see.
How should companies view the option of making a strategic pivot in the current business environment?
Pivoting is something that startups do all the time. Obviously 180 [degree turns] are pretty rough, but certainly there's a new paradigm out there. There is a new way to look at your company, and there may be areas that you can go at.
Take, for example, the near-term revenue opportunities on smaller deals, versus the big deals, which take a long time and require a lot of capital. I see some startups focusing on these smaller deals where you can get revenue quicker, versus the big home run that may make you a lot of money down the road. These smaller deals can bring cash in, extend your runway and lower your burn.
What else can you do to strengthen your position coming out of an economic downturn?
As a buyer looks at a company, they’re going to be looking at, what did the company do during this timeframe? What did leadership do to safeguard the company? What action steps were put in place to protect and improve the company?
Work on the company more than normal, versus in the company. What seems to be new now is that leaders have a bit more time to focus on where they are and where they’re going. Make the best use of this opportunity. You normally don’t have this luxury.