Good article!

Your point on companies with cash on hand will benefit from the recent turmoil reminds me of Han-Shen Yuan’s article, “Now’s the time to scratch that start-up itch!”

Han pointed out that now is a GREAT time to start a new company — the recession acts as a fire that clears the field, allowing fresh sprouts to have access to sunlight and nutrients.

So even a down business cycle may not be all bad.

Han-Shen said:

If you’re still thinking about joining an unestablished start-up or starting your own company, then my advice is to do it now.

In the last 20 years, there have been three worldwide recessions, and we’re in the midst of one right now. During these times, established companies struggle. The buildings, the employees, and all of the regular costs a company incurs are modeled for when things are going smoothly and when revenue offsets the costs of daily operations. When the revenue picture turns south, or in the current environment, completely evaporates for some ill-fated companies, the recession acts like a forest fire destroying companies indiscriminately.

When companies do survive these times, they either did so because they had large cash balance sheets, or they restructured their operating costs: layoffs, long-term lease commitments, and benefits.

Meanwhile, small or non-existent companies are fine during these times. They are already capitalized to make little or no money. As a result, the playing field has been leveled.

History shows that some of the largest and most promising start-ups are often created during these times because as the incumbents get burned down to the ground new companies emerge from the cinder as green shoots. WeWork, AirBnB, Lyft, and Uber are just a few prominent examples that were created from the last recession.