As many as 55% of technology CEOs were unprepared for the economic downturn caused by Covid-19 even in March, according to a report by research and advisory firm Gartner.
In fact, 43% of those surveyed were worried about an economic recession impacting their revenue growth in the next 12 months. However, many delayed taking action to prepare for this eventuality, according to senior research director Patrick Stakenas.
The company recorded responses from 285 CEOs or executives with similar posts in North America, western Europe and Asia Pacific regions for the Tech CEO online survey. The companies in the survey had an anticipated annual revenue of upto $250 million for 2019. It was conducted between December 2019 and February this year, completed weeks before Covid-19 was declared a pandemic.
Cash burn rate, or the rate at which a company loses or spends money, has not been in focus for companies, which has led to a severe cash flow problem during the crisis, resulting in an economic downturn, Gartner said.
Also, as funding opportunities are scarce, companies must survive through existing customers and the cash available until the economy recovers completely, Stakenas said.
“Startup (and) technology CEOs must measure cash flow on a weekly basis. With a worst case forecast in hand, they can determine the crunch points and assess the company’s ability to survive Covid-19,” Stakenas said.
Additionally, CEOs must also look into drastic cost cutting, acquisition of additional capital or the sale of the company if their cash runway is between three and six months, it said.
If cash flow is available, CEOs must run on a lean budget for at least 18 months to ensure long-term survival and further fund the company’s growth, it added.