Entrepreneurs Cope with First Broad-Based “Balance Sheet” Recession

This article appears in the June 2020 Center for Advanced Entrepreneurship newsletter. 

By: Mike Gallagher

Over the course of the business cycle in the post-depression American economy, we have witnessed many shocks and recessions.

Mike-GallagherUsually, the result of the downward arc of the business cycle is a broad slowdown in GDP, and managers cope appropriately on the income statement by reducing expenses in line with lowered revenue, with no real immediate concerns around liquidity.

Starting in late March 2020 however, revenue plunged to near zero for many Central Florida firms and remained there. This was unprecedented in modern times, as other economic shocks have been short term in nature and measured in days not months (Gulf War, 9/11, etc.).

Suddenly liquidity mattered very much, and our entrepreneur community was only as strong as its balance sheet. Ratios such as cash available divided by cash burn rate became the single most important calculation as managers struggled to calculate how long they could stay in business. Startups used to comfortably raising additional financing rounds in sync with improving revenue traction watched the capital markets freeze.

For some firms, existing investors stepped in to fill funding gaps. PPP loans arrived just in time for others, while the highly levered simply could not survive.

Juxtaposed among these painful scenarios were businesses that flourished in the stay-at-home economy selling things like takeout food and broadband connections. This has created a two-tiered economy which has made broad discussion around the topic of pandemic recovery awkward.

In the end, strong balance sheets will consolidate assets and the economy will recover. I believe entrepreneurialism is one of this country’s greatest strengths and that this positive force will cope, adapt and thrive through this pandemic.

At Crummer/Rollins CFAE, we feel strongly that the job creating entities of the future will spring forth from our initiatives that support the local entrepreneur community today.

About Mike

Mike Gallagher is the current Chair of the Center for Advanced Entrepreneurship’s Board of Advisors at Crummer|Rollins College a position he has held since 2018.

Mike is a 30-year telecommunications industry veteran who has the ability to both operate complex entities and devise strategic direction. He has proven leadership experience, having built several successful and highly performing management teams. Currently, Mike consults for various Private Equity clients, most of whom were at one time investors in his entrepreneurial telecom enterprises. He is currently working as Executive Chairman for Hosting, which is a Pamlico Capital backed Datacenter and Managed Services/Unified Cloud provider. Mike also serves on several boards including Pamlico’s rural broadband provider Vast Broadband, Momentum Telecom, and C&D Technologies. He is also the owner of a telecom focused consulting firm, Eldora Partners.

Mike has a degree in Mathematics and Physics from Rollins College, and has attended a certificate level course in Data Communications from Washington University.


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