Let the crisis make you stronger

It will serve no-one any good to drop the ball completely right now. Today is the time to set-up your business’s tomorrow. LOUIS COUTTS

By Louis Coutts

This article first appeared on 10 October.

In an article now in the archives of SmartCompany and that was written almost 12 months ago to the day, I made the following comment: “So, hopefully, things will keep rolling along, but knowing that there is no such thing as perpetual motion, I know that somewhere down the track, new threats will come out of the woodwork and we ought be ready to respond. Think about refueling so that you can keep your foot on the gas and constantly improve your value offering so that even if a tsunami comes along, you will still be in good shape.”

In an earlier article in August of last year I made these two observations: “So is the current crisis a threat to growing companies? It sure is if you have been imprudent in your financial management, but it won’t be so bad if you have kept some money in the till.”

And further: “What happens if the debt crisis in the US results in reduced consumer spending with the result that fewer people buy Chinese goods? These are the tip of the iceberg in the risk facing growing companies.”

For well over a year I have been concerned about a certain recklessness that seemed to be founded in a belief that the world as we knew it would not come to an end. I felt that we were ignoring sign posts such as a deepening mess in the Middle East that was consuming dollars and lives and making the world less safe; a Chinese economy that was rampaging on the back of unceasing spending by American consumers; the insensitivity of central banks to the effect of the interest rate adjustments as though they were preoccupied by a chess game rather than impacting people’s lives.

These were some of the reasons for cautioning financial prudence. Today, there are people who are really decent good and sensible people losing their underpants (they lost their shirts some time ago). Fortunately, there are many who are still healthy and afloat. The people who have lost their shirts and underpants ignored one of my financial rules, which is “always leave some money in the till”. If you did this, the current crisis is a blessing and not a curse.

Now is the time to take stock and if you have some money in the till, you have the freedom to take stock in the best possible situation.

If business is slowing, the first and instinctive reaction is to “downsize”. Stop and think about that for a minute. One day, you will come out of this mess and things will pick up and then you will be saying that you have to “upsize”.

Some strange things happen when companies decide to downsize. Often they find that before they actually start laying people off, some of their best people leave. There are a few reasons for that. The first is that often people who are high achievers have an extraordinary sense of insecurity and they never feel they are doing as well as they might appear to others. This drives them to be better. When the word gets around that the company is going to “downsize”, they feel that they will be the first to get the sack and so they start looking for another job.

Another reason is that good people are generally always employable and so they look to set themselves up in another company or by themselves before the chop comes.

A third reason is that they feel the company might be on the skids and so they had better get off the ship before it sinks.

Downsizing can set a business back years and put them behind the eight-ball when the economy turns around.

If you have some money in the till, this is a great time to position yourself to be the leader when the economy turns. You can spare some of your good people to go off and do courses and improve their competency and skills. You will have time to sit down and look at the landscape and do some serious long term thinking and planning.

You can work with your people and visit some of the strategies you have embarked upon in the past and examine their effectiveness. It is likely that you will uncover some surprises that will enable you to embark upon new directions. You may even discover things that you can do in a downturn that you couldn’t do when things were rolling along and that will provide some immediate relief from the downturn.

You will have the time to study the market much more thoroughly and develop a range of scenarios and strategic responses to those scenarios, so that you will not be reactive when things turn around but be a leader.

If things slow, it will be a great time to step back and review your entire operations and systems in the cold light of day and to adjust them to the new realities. One of the things we have already learnt is the reality of global society. Up until now we have talked about globalisation without realising how intimately we have become linked to the global economy and the global financial system.

In taking stock it will be prudent, if we have not already done so, to develop a greater awareness of global issues because they will continue to dominate the environment in which we conduct our businesses, even if it is a sandwich shop outside offices that used to house “downsized” executives.

However, all of these things are only possible if you left something in the tin. If you didn’t, then you should certainly develop financial strategies so that in the next turn of the tide, you will leave something in the tin.

The current situation therefore is a great opportunity to take time out, to sit back and review your operations and work with your people to build an even better growth entity than it has been in the past. However, growing a business sometimes requires a period of consolidation. This may be the time.

Louis Coutts left law and became a successful entrepreneur. His blog examines the mistakes, follies and strokes of genius that create bigger, better businesses. Click here to find out more.

To read more Louis Coutts blogs, click here .

Comments

Seth writes: Louis, great blog post today. I agree, now is the time to be seeking opportunties to grow your business, rather than almost give up at the bottom. There are always opportunities, you just have to know where to look.