industries

Life in the Slow Lane

By Tony Wanless /

When economies go into recession, companies often curl into fetal positions, abandoning their overall strategies and focusing on simple, often short-sighted, defensive manoeuvres that leave them vulnerable in the future.

But some companies, whether out of luck, vision or sheer stubbornness, survive these downturns and go on to success by combining old-school business thinking with innovation and flexibility.

The Problem
Surrey’s FinancialCAD Corp. (FINCAD) was started in 1990 by two ex-stockbrokers to provide software that helped the financial industry manage derivatives, a product that had just emerged. But the product was so new and the local market so small that there wasn’t much uptake. FINCAD targeted institutional players, but, as co-founder and current CEO Bob Park explains, its local market “could be collected in a room.” It was a classic case of a product being ahead of the market.Then, a year after startup, a recession hit, and the institutional players had even less time for this newfangled financial tool.

The Solution
Instead of giving up, Park and his partner adjusted their plan. Rather than try to hammer traditional prospects with increased sales noise, they found a new market: corporate treasurers. FINCAD quickly shifted from simply providing software to educating clients about the new products and how to manage them.

The owners also sharpened FINCAD’s value proposition to show these new prospects how the software could increase investment returns, better manage financial risks, reduce the cost of borrowing and lower the cost of raw materials – results that are always in demand by managers but even more so in a recession.

FINCAD continued to grow, reaching a few million a year in revenues. Then in 2001, another recession hit. But this one skirted FINCAD’s core market, and the company was still closely held by original owners and investors. Unlike VC-funded technology companies, which require massive market growth to deliver big investment wins, it sailed right through the downturn on revenue from a steady customer base.

Several years of higher growth and global expansion followed as the use of derivatives became more common. Today the company provides tools and services to more than 35,000 financial professionals and financial software builders around the world.

FINCAD continued to develop its offerings, and today provides valuation, pricing, risk assessment, cash-flow forecasting and regulatory-compliance tools to a diverse market that includes banks, investment fund corporations, professional-service firms and governments.

FINCAD’s value proposition remains essentially the same, but it has been making business model adjustments. For example, as new Internet-based communications tools have emerged, FINCAD has changed to become primarily an online company.

Also, FINCAD never had access to much investment, which was a hardship at first, but now Park recognizes that it was a blessing in disguise because it taught him and his partner how to survive.

Lessons

  • Diversify your customer portfolio. Turbulence disrupts traditional client relationships, so forge new ones by expanding beyond your region and typical customer base.
  • Continually adjust. Change is a constant, and a smart company is always looking for better ways to do things. Leverage new technologies to cut your costs.
  • Control your own destiny. In tough times, widespread investors can become skittish and may try to steer you in different directions. Because FINCAD retained majority ownership, Park and his colleagues can execute their own strategy.