More than half of the teach CEOs were not prepared for the COVID-19 crisis, according to a Gartner survey
A Gartner survey from March says 55% of tech CEOs are not prepared for an economic downturn due to impacts of COVID-19 pandemic. The 2020 Tech CEO Survey was conducted with 285 CEOs in North America, Western Europe, and the Asia Pacific. The companies surveyed had anticipated annual revenue of up to $250 million for 2019. Conducted between December 2019 and February 2020, the online survey was completed weeks before Covid-19 was declared a pandemic.
As per the survey, 43% of respondents were worried about an economic recession affecting their revenue in the next 12 months. The majority of them also delayed taking action to prepare for the crisis. The pandemic has also resulted in a scarcity of new funding while the available capital is becoming weaker. Tech companies will need to sustain existing customers and cash until the market conditions start changing gradually. The survey suggests tech CEOs should take immediate action like using cash burn rate to calculate financial runway. Only a few of them measure the cash burn rate which has led to severe cash flow problems for companies during the COVID-19 pandemic.
In the case of availability of cash flow, CEOs must run on a lean budget for at least 18 months to make sure of long-term survival and further fund the company’s growth. If an organization’s cash runway is between three and six months, the survey suggests measures such as serious cost-cutting, acquisition of additional capital, or the sale of the company.
Startups strapped for cash will need to run the business very lean to survive. Gartner recommends preparing for the future but managing the business as it is now. At present, employees are working remotely and there is a significant decrease in the revenue engine, therefore it is important to manage business appropriately as it feels today.