We had our first board meeting last week since the COVID-19 crisis took hold and, of course, it was like no other I or my team have had to prepare for.
Like most boards in innovative new technology businesses, they are looking for growth and predictability – challenging at the best of times, but in a pandemic? I am happy to say that the environment (as always) was hugely collaborative and supportive.
Initially it was all about triage – focusing on people, cash conservation and customer communication: where are my people going to work; what is happening to our revenue and cash; and how do I support my employees and customers. Predictions by Beauhurst show that 53% of the UK’s high growth businesses are at risk and struggling to exit this phase, which makes miserable reading.
Our ship has been steadied and now we are moving into a phase of trying to lengthen our business planning from weeks to months, answering new questions along the way. How is income going to be affected in the medium-term; where are the new opportunities; and how can I adapt the organization to be ‘match fit’ for the challenges ahead (I hate the term for its lack of empathy with those directly affected but it seems increasingly well used)?
So, what’s next and what should fast-growing businesses like Speechmatics be focusing on? The Economist has started to talk about the ‘90% economy’ overall, but happily is more optimistic about the prospects for B2B software businesses, which it believes will be amongst the least impacted. Numis published an interesting report which predicts that both the number of transactions and enterprise values (EVs) are likely to shrink by 25%-50%, based upon what happened in 2001 and 2008.
The trend that we saw prior to the start of the crisis has accelerated and investors are refocusing on the fundamentals rather than just out-and-out growth: capital efficiency; strong unit economics; and a line-of-sight to profitability. Our outlook is, therefore, that we should expect a slowing rather than stagnation or reversal of growth and that we need to double-down on the improvement of our key metrics as we conserve cash until investor appetite and, therefore, valuations return.
Fortunately, being “small” and fast growth means we have an agile mindset where larger competitors are struggling to adapt and manage their cost base. We have been able to change tack rapidly to create innovative marketing strategies and reach new prospects. We’ve maintained a listening ear and intimacy with our customers and partners due to our team’s established relationships and our solid reputation in the market. Looking to the future – I need to ensure we continue to motivate and develop our hugely talented team. They have been working at home for weeks, the pressures from outside work are massive, they are being exposed to organizational change and the burden of work is likely to increase as the business continues to grow.
There is no doubt that levels of predictability are harder to achieve and ultimately the effects of the crisis are not yet known but it is imperative we keep looking to the future, stay agile and innovate.
John Milliken, CEO, Speechmatics