Five Actions to Take During an Economic Downturn

Contraction hovered over the economy through Q2 2009 with a negative .7% growth.  The economy also saw a job loss of 254,000 as employers continued to cut back.  Former Federal Reserve Chairman Greenspan sees a 3-4% growth in the next six months as inventories and sales reach equilibrium.  Greenspan expects a flattening out for the remainder of 2010.  At a recent economic conference I attended, economists forecasted unemployment rising to 13% in California, peaking in Q1 2010.  According to them, healthy growth will not occur until 2012.  A significant number of attendees thought the Silicon Valley economy would stagnate through 2013.

How are businesses to respond to this somewhat bleak forecast for 2010 and beyond?  I would like to suggest five key actions to take.

1. Keep a laser focus on strategy.  A clear specific strategy will be paramount for the next several years.  Strategy is more than taking a monthly or quarterly outlook, reacting to the news, and responding with a shotgun approach to the market.  It takes greater focus on a few effective actions.  This may mean adjustments, redirection, and realignment of goals.  This leaves no time for retrenchment.  Rather take advantage of core strengths and capitalize on them rather than scattering money in all directions.  Crystallize market focus.  Clarify your mission.  Readdress your customer profile for marketing and sales efforts.  Sharpen differentiation.  Do you need help with a strategy?  Let’s talk.
2. Engage a targeted forecast.  The word budget sometimes conjures up artificial forecasts for specific expenditures and then attempt to keep them in line.  I use targeting.  It is more proactive and engaging.  It includes every activity in the business.  Targeting is a measuring stick for key results and encompasses more than expense allocation.  Targeting integrates objectives and desired results.  If they aren’t, a business will never be able to know how much an objective will cost.  Need guidance for targeting your business?  Let’s talk.
3. Set growth objectives.  Retrenchment objectives lead to one place – the exit.  Objectives manage a business.  I like the adage – if you aim at nothing, you’ll hit it every time.  Laurence J. Peter of the Peter Principle fame wrote, “If you don’t know where you are going, you will probably end up somewhere else.”  Where are you taking your business?  Objectives are to the business as breathing is to the body.  They measure achievements and distance to results.  They specify actions and make a statement about whether an endeavor is a dream or a reachable reality.  They keep the shotgun approach at bay.  Want to know more about objective setting?  Let’s talk.
4. Evaluate business practices.  A friend of mine once quipped, “I don’t want a doctor practicing on me.”  Although amusing, it makes a good point.  I would call on that doctor if his or her practice reflects results.  Results depend on sound business practices.  They help save money by giving a clear path from product and service development to delivery.  They enable clear communication of expectations to employees, vendors, customers, and others with a vested interest in your success.  They help safeguard the business from activities that suck money out of it or seek to undermine it.  Need advice on implementing sound practices in your business?  Let’s talk.
5. Expand your network.  Successful business depends on who you know as well as what you know.  Are you well connected within your business community?  Being so is an ongoing and challenging activity of reaching out to your network.  Your customers are key to reaching more.  Established associations and similar networks enable expansion during down times.  Keep in touch.  Consider the stratification principle.  It views networks as multi-dimensional: the individual, community, corporation, marketplace, and social networks to the third and fourth link in the network chain.  Advertising and channels bring a certain return.  They factor significantly in revenue generation.  However, one contact could bring in the largest sale.

Room for improvement always exists in each of these business areas.  Never letting up on continuous improvement unlocks the door to effective execution.  Be open to advice on them, and be prepared to execute.  For more information on any of these five principles, give me a call.  Ask for my white paper on Cash Management for Improved Business Performance.

AFB Business Solutions empowers business owners and financial executives with financial strategic tools, accounting and financial applications, and training for managing toward growth and profitability.  Visit our website to learn more about our services (www.afbbusinesssolutions.com).