Tuesday, January 12, 2010

Learning From A Recession

Survival was the main objective for many companies during the recession that has gripped the global economy for the past 18 months. Businesses got leaner, more reactive, and certainly learned to operate with more efficiency as a matter of necessity rather than want.

Whether your company was in the real estate market or not meant little when the international markets froze, prices tumbled, and a wide-ranging economic disaster struck. It is nothing any of us could have planned for (except for the brilliant hedge fund managers who bet against the bubble and took home 1000% gains for their efforts) but an event that truly separated the good business managers from the great. Those of us lucky enough to be young, still-employed and interested can take away many great business lessons.

Don't become complacent. Your balance sheet is the most important indicator to how you can survive in a climate of free-fall. When markets freeze, the ability to get financing to keep your company moving becomes near impossible. Your reserves are your ticket to survival. Unless you operate the rare 'recession-proof business', you can count on a large percentage of your sales and profits dipping in these tumultuous times. Cash flow will be the key. Always monitor your books and understand how long you could survive if things change.

React quickly. Don't wait until the business is lost to make the necessary cost and staff-cutting decisions to save the company. Make your company as lean as possible without compromising the essentials. Sales, marketing, and research & development must remain strong. While making these changes, always remember the tremendous opportunity a recovery brings. Position the business to reap the rewards of another company's lack of preparation. The only way to dig yourself out of a revenue and profit hole is to make sales!

Diversify your customer base. One account should never be responsible for more than 15% of your revenue, especially in tough times. Always envision the future based on the possibility that you could lose your biggest account. What would happen? Understand the impact a sudden change could have on the books. This is also an opportunity to diversify your employees. Recessions are a great time to recruit talented people who have had a run of bad luck.

The leader must make themselves visible. Your company needs to know who is in charge and that they have a plan to attack the problem . Her or she is their ticket to employment. This kind of decisiveness and leadership has a trickle-down effect in how they deal with customers and market to prospects.

Take the lessons from tough economic times and apply them when times are good. It is the only way to truly ensure your companies' ability to survive and thrive in all climates.

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