By Dana Borowka, MA
Whoever coined the phrase, “What goes up, must come down” must have been an economist. Nothing does a better job of explaining the cyclical nature of our economy. The problem faced by business managers is that once we’ve identified which part of the cycle we’re in, it’s too late to do anything about it. Forecasting the next upturn or downturn, and preparing accordingly, is the secret to business survival.
To give our friends and clients time to adjust for the next change in the economic cycle, we’re recently held a special Open Line web event entitled, “Planning for the Next Recession – Now!”: Audio / Slides.
The purpose of this article is to highlight a few of the points our panelists explored in more detail: Why expect a recession and what to do now to prepare your business for it.
The Ups and Downs of the U.S. Economy
History has proven there is a 7-10 year cycle in the U.S. that consists of periods of recession, recovery, accelerating growth, and declining growth. Like clockwork, every decade we cycle through all the stages. The last recessionary period was 2008-2009. Since then we’ve experienced a long period of recovery culminating in what some expect as accelerating growth in 2017. So far so good. But remember, what goes up must come down.
The Next Recession is Just Around the Corner
If the U.S. economy has been climbing its way out of the recession for the past eight years, we’re approaching the time when we can and should expect another downturn.
There will be another recession in the U.S. The only real question is when, but based on historical trends, that time is 6 to 12 months away.
It’s important to note here that I’m talking about the “normal” economic cycles we experience, not those triggered by major unforeseen events such as occurred September 11, 2001, or the collapse of Lehman Brothers in 2008.
Recession? You’re Crazy, Business is Great!
For most of our clients and readers, business is good to great. Everyone is bullish about higher sales and profitability in 2018.
However, the clock is ticking. Our panelists from our monthly Open Line web conference believe it will likely be pre-staged by a series of financial events that trigger a severe pull-back in the market and a rapid slowdown of the economy.
One way to suspect that the downturn has begun is to study your order board. Are sales tapering off? Are orders being placed less frequently and for smaller amounts? This tells you your customers are feeling the change.
Are you noticing an uptick in job applicants? This can mean other businesses are beginning to shed workers.
Rather than get distracted by attempting to pin-point the time of the next recession, it’s wiser to simply agree that there will be one, and it’ll likely occur within a few years. With that agreement in place you and your staff can prepare the ship for heavy weather.
Beginning immediately, you can take the following steps to prepare your business for operating through a recessionary period.
- Your management team must accept the same economic picture and be driven to succeed in spite of it. This is a great time for imagination. Work with the team to build action plans based on three different scenarios: a. recession, b. fast growth, c. slow growth. Or, look at it another way. Build a plan for what actions to take if sales drop by 20%, another plan covering if sales drop 40%. If you don’t have an executive dashboard, ask your CFO to build one with indicators for business growth or decline.
- Make sure everyone on the team is mission critical to building value for the business. Get lean, or refocus some jobs so they are contributing more to the value of the business in some way. If you’ve been adding staff the past few years, there’s a good chance you’ve taken on some “dead wood”.
- Keep the team motivated. One good way is to identify and acknowledge key people in the organization and make known the succession plan.
- By all means, get the right people into the right slots now so they are confident in their roles by the time the downturn is really felt. A recession is no time to be breaking in key managers.
- Don’t overlook your Accounts Receivable department. This may become your lifeline during tough times. Invest in top-notch people and systems.
- Get your line of credit set. Reduce debt.
- If you believe the downturn will be accompanied by higher interest rates, do what you can to lock in prices for your raw materials and leases.
- Take care of your customers. Go out of your way to be seen as invaluable.
The Secret Code
Did you notice a common thread in this advice? Six of the eight recommendations involve the quality of your employees and how well they work together as a team.
Placing the right people in the right positions, for example, requires skillful hiring aided by in-depth work style and personality assessments. Reduce the risk of hiring or promoting the wrong person. Learn more about our in-depth work style assessments.
Pulling the team together and driving forward with a single purpose requires serious team building, not feel-good exercises. An investment in team building now will strengthen the company’s ability to thrive when other companies falter. Learn more about LCS team-building services.
Developing your managers to have excellent communications skills is vital to an organization’s growth, and absolutely mandatory during trying times, such as recession. Learn more about how LCS empowers key personnel so projects flow more smoothly without frustration.
In closing I recommend a book by two economists who have been extremely beneficial to our business. The economists are Alan and Brian Beaulieu from ITR Economics. Their most recent book is, “Prosperity in the Age of Decline.” I encourage you to read the book, listen to our Open Line panel discussion audio / slides – and be prepared for the Next Recession.
Permission is needed from Lighthouse Consulting Services, LLC to reproduce any portion provided in this article. © 2020
Dana Borowka, MA, CEO of Lighthouse Consulting Services, LLC and his organization constantly remain focused on their mission statement – “To bring effective insight to your organization”. They do this through the use of in-depth work style assessments to raise the hiring bar so companies select the right people to reduce hiring and management errors. LCS can test in 19 different languages, provide domestic and international interpersonal coaching and offer a variety of workshops – team building, interpersonal communication and stress management. Dana has over 25 years of business consulting experience and is a nationally renowned speaker, radio and TV personality on many topics. He is the co-author of the books, “Cracking the Personality Code”, “Cracking the Business Code” and “Cracking the High-Performance Team Code”. To order the books, please visit www.lighthouseconsulting.com.
If you would like additional information on this topic or others, please contact your Human Resources department or Lighthouse Consulting Services LLC, Santa Monica, CA, (310) 453-6556, firstname.lastname@example.org & our website: www.lighthouseconsulting.com.
Lighthouse Consulting Services, LLC provides a variety of services, including in-depth work style assessments for new hires & staff development. LCS can test in 19 different languages, provide domestic and international interpersonal coaching and offer a variety of workshops – team building, interpersonal communication and stress management.
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