Preparation is Key During the Covid-19 Crisis

23 June 2020

Preparation is key during COVID-19 crisis

For many businesses, COVID 19 took away the fundamental tool that management teams rely upon heavily to make sound business decisions – the ability to plan and prepare effectively. With so many unknown elements affecting businesses in the ICT sector, decision-making and agile management have taken on a far more fluid dynamic as company owners attempt to blend pragmatism with their growth ambitions, and for some enterprises – survival.

As mergers and acquisitions advisors to mid-market companies in this sector Evolution Capital is working with a number of businesses either preparing to sell or looking to acquire. Evolution has evidenced some innovative and highly proactive decision-making that is delivering value and creating favourable conditions for ‘bounce back’ when the crisis is over. The turmoil in the wake of the lock-down in March 2020 has left many owners in no doubt of the need to have an agile executive process to complement a robust business model.

The more obvious decisions were taken first, accelerated by the requirement for home-working, increased vigilance on cyber-security and flexible support programs. However, for some traditional industries order books have been destroyed over-night whilst for many ICT businesses, demand, particularly during the first month, skyrocketed. What has been obvious, and particularly within Evolution’s group of clients, is that prescient management decisions are vital to combat the effects of the crisis. In all cases, consequential business decisions need to be made or dynamically changed to fit the vagaries of the current marketplace. 

It is comparatively early to second-guess what happens next but organisations with strong recurring revenues, long term contracts and stable revenue streams are in a strong position to emerge with their value intact. As owners struggle to get a sense of the new normal and attempt to return to pre-pandemic conditions management teams need to assess all the potential scenarios as they are presented. 

“We reacted quickly to counter the effects of the pandemic and initially had to cope with a large influx of orders. This was an expected spike in business and our decision to increase our investment in lead-generation to ensure the sales-funnel was full when we most needed it is paying off. Mobile apps, softphones and MS Teams are all selling well. We also decided to ‘upskill’ all our staff in the complete business cycle from sales to project management to accounts to ensure they had a greater awareness of our internal process as a business. 

This has helped us take a much more consultative approach with our customers, which is always good for customer loyalty. It’s obviously been an unsettling time but with 100% staff retention and a sympathetic customer approach, we anticipate coming out of the crisis in good shape. We have always worked hard to create a robust business model and with 80% of our business coming from recurring revenues we are in a stronger position than some of our competitors who have relied on large, single capital payments as a revenue model.

In April we bought Info-sec Cloud which has proved incredibly timely and the early responses to our cybersecurity webinars have been overwhelming providing us with early validation of our acquisition strategy. As veterans of the traditional ‘calls and lines’ business, we have focused on creating a flatter, repeatable business model which we believe will ensure we emerge from the crisis in a strong position.”
Ralph Gilbert​, Joint Managing Director of Focus Group an award-winning telecoms provider

Despite the chaos caused by the crisis preparation and planning have been a key factor in plotting a successful path through the emergency and not only by retaining value but in many cases unlocking hidden value in the business. 

“Despite the current climate, life has to go on and as 70% of our business is managed services on long contracts our business model has proved resilient. Running a company under lock-down is a bit of a roller coaster within which we have to work hard to make some swift, impactive decisions ensuring we do not lose any business. We are focused on vertical markets like Banking, Insurance and Logistics and get a unique view of the effects on these markets. Budgets are now truncated as most of the new projects have been shelved. 

However, there is an increasing reliance on legacy equipment and we decided early on that we should focus on offering our customers vital support in this area. After the first month of turmoil, things continue to stabilize as we assist our clients in adopting the best practices to manage their businesses effectively such as running their projects remotely.”
Daren Bland, CEO of Recarta IT

A sound continuity plan appears to be another key to allowing companies like Recarta to focus on faster collaboration and compressing cycle times in each part of their organisation, which in turn allows them to support the customers dynamically. Bland continues, 

“We have worked even harder at improving our customer communications and decided, wherever possible to increase the frequency of our service desk calls. If there is a silver lining, I believe we are seeing some efficiency gains from remote working. Ultimately, if you have a team of smart, intelligent staff you can replicate that environment remotely.”

Despite the problems the crisis has posed for companies, life and business continues, mandating a need for thorough preparation and meticulous planning. This strategy has enabled many organisations to react to changing conditions facilitated by proactive decision-making. 

SMEs in the ICT space are well placed to react quickly to changing market conditions ensuring continuity of vital services to their customers. Like many companies, we experienced a flurry of activity as our clients moved toward home-working and into the cloud. 

The first thing we had to decide was how to support their new environments. We took the decision to extend our working hours to provide continued support in non-standard hours to ensure business continuity for our clients. One of the biggest issues they faced was the increased security threat from malicious actors trying to take advantage of the situation.

There is still a significant amount of uncertainty at the moment and the knee-jerk reaction is for businesses to look at cost savings across their enterprise. We decided to implement a 20% discount in support fees, contingent on payment terms, across the board for all our clients to help them through the crisis. This has improved our cash flow and, in the long–term we believe, our customer loyalty, as we share some of the financial burden with our customers."

Alex Caplan, MD of international managed services provider, Synergy Associates

The ability to make decisions in an agile and proactive manner has always been important but the challenges thrown up by COVID 19 in the mid-market has meant that organisations reacting rapidly have strengthened customer relationships. Delayed capital expenditure, remote working and cyber-threats have caused many sleepless nights but a pre-emptive approach has bought a favourable reaction. Caplan continues;

“If the crisis has taught us anything it is how to do more with less. The first thing everyone did was to review their cost base and suppliers – which is exactly what we did. We had to provide an enhanced service on a reduced budget and ensure that the machine went faster. Hopefully, normality is not too far away but we have already seen that the evolution of change has accelerated. For example, our ‘fine art’ clients have all reconsidered their business models and we need to help and support them to do business in a digital, cloud-based economy.”

Although the crisis has seen any number of capital expenditure projects shelved the same cannot be said for business owners looking to exit. For advisers like Evolution Capital, the demand for their expertise is high although they have had to make a few adjustments to their operational approach. 

“It has been business as usual for us but as a ‘high-touch’ organisation, physically meeting our clients regularly, we had to adjust our operations accordingly. A significant upgrade in our video conferencing has enabled us to reorganize quickly. Marketing has also changed and we look to impart a lot more help and assistance through a proactive webinar and video programme. As far a deal-making is concerned we have seen an above-average deal flow despite the crisis. All our retained clients can demonstrate robust business models that have been particularly resilient in these testing times and can be confident that values will hold up well. It has been a great validation of our approach. Preparation is key to surviving the crisis and we firmly believe in detailed provisions for all eventualities whether for a business sale, acquisition or just ensuring that businesses remain positive.”
Stephen Taylor, Evolution’s Head of Business Intelligence

As part of this consultative approach, Evolution Capital is delivering a series of expert one-to-one consultations that can be booked here.

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