A CFO’s reflections on emerging from COVID-19
Three factors that helped cushion the blow
If I’ve learned one thing since the start of the pandemic, it’s that COVID-19 has accelerated the speed of change. As a CFO for 26 years, I thought I had seen just about everything – from recessions, emerging technologies and digital transformation, to ever-increasing pressures to control costs. But the pandemic has been a truly unique experience. The pace of change in the economic environment is unparalleled. The entire world economy was put under stress and specific industries reduced to zero activity in this challenging time. Nothing can prepare you for this type of event.
Quarterly forecasts are now real-time responses to balancing our customers’ ability to pay with the need to collect for services. We’ve had to forecast on the fly as we constantly receive new data, making updates to where we thought we would be versus where we are.
Thinking outside of the box
But not all the change is bad. We can’t overlook trends in our favor financially. Travel and entertainment expenses were reduced dramatically, creating a new paradigm from now on. We’ve been forced to examine every vendor relationship and continue to realize savings by eliminating unnecessary services and lowering costs. This process would not have occurred in such a short time without more resistance to change had it not been for COVID. The crisis provided the incentive to think outside of the box.
Deepening client relationships
Our cost structure will continue to change. Now that we are all more comfortable using conferencing technology, it’s likely travel and entertainment costs will remain lower. Also, customers realized the importance of hybrid technology and the benefits of scaling their IT needs to meet changing economic environments. This should lead to an acceleration for our industry. A company like Flexential that provides IT infrastructure, colocation, cloud and connectivity services for businesses is well-positioned to benefit from this long-term. Finally, we reinforced stronger relationships with our customers. We worked with a number of our customers to ensure they could stay in business until the economy improved. We were there for them, and that will build lasting relationships that should keep them as customers for a long-time. In some cases, we worked with customers far more than we had ever done before and were able to become trusted advisors during the process.
As I look back at the experience, I’ve taken away three key factors that helped my company cushion the blow:
- Recurring Revenue - The value of the recurring revenue model supported by long-term contracts came to the forefront. We take this for granted, but this model enabled Flexential to come through the crisis with very little impact on revenues.
- Real-time Information - Having information is critical. With the accelerated pace of change during the crisis, we had to adjust quickly. Waiting 30 days to make a correction could have led to dire consequences. We were able to provide the management team insights into where we are today and where we are heading in the future. This provided the information and incentives to implement change.
- Diversification - The national footprint of our platform and lack of industry or customer concentration were critical. This has always been a focus for us, and it was a key reason for our ability to push through the crisis.
As we start to see the light at the end of the tunnel, trying to determine the timing of investments is still difficult. It’s also hard to set budgets without knowing when the economy will turn the corner. With talk of a vaccine happening, we need to be prepared to thrive when economic activity starts to accelerate again. While it’s essential to have the people and inventory in place to take advantage of this opportunity, we need to keep our “powder dry” in case we see a resurgence of the impacts or a lengthening of the timeframe to recovery beyond our current forecasts.