January 6, 2009

Are you REALLY in a recession?

The doom and gloom associated with the economic news of the past year or so is certainly sobering. Job losses mount at a staggering rate; companies are closing plants and reorganizing by laying off workers, and the lifeblood of small businesses- the credit market- is reeling so much from the effects of its current status […]

The doom and gloom associated with the economic news of the past year or so is certainly sobering. Job losses mount at a staggering rate; companies are closing plants and reorganizing by laying off workers, and the lifeblood of small businesses- the credit market- is reeling so much from the effects of its current status that financial institutions are seemingly more eager to hold on to what little capital they have, instead of providing it in the form of loans to businesses that need it to sustain their livelihood.

Another alarming development is that the government bailout package- initially provided with the intent of providing financial institutions with the resources to continue their operations- has appeared so far to be nothing more than capital that the institutions are hoarding.

There is no denying that times are really tough in this economic climate; however, having said all of this, my question to you is simply this; is your company really suffering in the way that the major companies like Bear Stearns, the Big Three Automakers, et al are? Or may it be the case that you are changing the way that you operate, because of the larger economic picture, creating a veritable self-fulfilling prophecy?

Here are a few items to consider as you make the assessment as to whether or not your company has to suffer the same fate as some of the recent more unfortunate higher profile organizations.

Are you truly doing everything that you can do to ensure that your company rides out the economic storm? You can decide what this translates to for your particular situation; it might mean tapping into a new market; changing your product mix or the range of your services; it might mean joining a networking organization to more effectively promote your goods and services; it might even mean selling your goods and services in the public sector.

Is your geographic location experiencing the economic slump to the same degree that other areas are? The upper Midwest in particular, and to a lesser extent places like Florida and California, are experiencing very difficult times. However, the crunch is not necessarily as bad in other parts of the country, Austin included. In addition, while some industries have been hit very hard, others may not be suffering the same fate.

Are your internal business practices consistent with your objective of being able to survive and thrive in difficult times? Do you have an established company budget, and is it being adjusted as needed for any drop-off in business? Are your Accounts Receivable (A/R) and Accounts Payable (A/P) procedures designed to put you in a maximum cash flow position at all times? Are you managing the human resource function in your business, such that everyone is pulling in the same direction, their efforts are being rewarded, and anyone who is not contributing toward the goal of success is either rehabilitated or jettisoned? All are issues to consider as you assess your internal capabilities.

The point is simply this; do not be complacent about the state of the economy, because the crisis is greater than most of us have seen in our lifetimes. However, by the same token, do not accept the dire economic climate as a potential body blow to your business. There are specific steps that you can take to ensure that your company rides out the rough waters, and emerges thriving on the other side.

A few thoughts: