I read with dismay an article in today’s Wall Street Journal - “Time to Stash Your Cash” by Brett Arends. My initial reaction was to think it was satire. Sadly I think this is not the case. In a time of crisis anyone in a leadership role, such as Mr Arends, has an obligation to show people the way forward and not fan the fears of the crowd. He has not done so, rather he advocates cutting every possible personal expenditure. This is rubbish and a recipe to ensure that the United States goes into a deep recession. While we need to be prudent in our spending choices, we need to keep spending to drive the economy to maintain jobs and ultimately return to growth.
I am sure that many people who work for Knovel, our customers and our suppliers are wondering about their immediate job security and what the next months will bring. We are fortunate at Knovel to have a stable base of business that runs across many industries and much geography. While we will feel the effects of the current situation we are fortunate to have diversified revenue sources and good capitalization. This bodes well for us to weather a difficult time. It also presents us with a responsibility to re-double our efforts to maintain and grow our business for our employees, our customers (engineers, scientists, librarians…), and our suppliers (publishers, professional societies…). We will do this for all our stakeholders and I sincerely hope that each of them will take a similar approach and keep the World’s economic engine moving.
These are times that present substantial opportunities for growth. To illustrate Jack Welch at last week’s World Business Forum in New York suggested the following:
While he considers himself an optimist, the current economic news convinced him that we will see significant negative growth in Q4 and Q1 of next year (he is uncertain whether Q3 will be flat or down). He said this is what the companies in his private equity stable are doing to prepare for tough times and inaccessibility of capital:
- Adjust your cost structure and de-leverage immediately
- Take care of your top employees – in cases where the economy causes them to miss their numbers, put in place a new compensation pool to keep their pay reasonable and not risk losing them.
- If you have access to capital, get ready to “bury or buy” your competition and consider using more generous credit terms to keep and gain customers during this period
I could not agree more and we have or will be taking every one of the steps Mr. Welch has advocated.
Thanks,
Chris Forbes
CEO - Knovel
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