People frequently ask me “How’s the economy?” They do this because I work with multiple companies and have insights into their performance against plan and the prior year. But the truth is that I don’t spend many cycles thinking about the overall economy.
While I believe it’s important to understand the current economic climate in which you are operating, it’s also a bit like understanding the weather forecast. You can and should prepare for it but there is nothing you can do to change it.
Most companies are built (at least in the near term) around an expectation of a certain business volume for the upcoming year. I have seen companies blow the doors off their plan in a bad economy and companies struggle when the economy is on a roll. While it’s important to understand the economic environment in which you operate I believe that the performance of most businesses is guided more by the internal operations, marketing, customer service, etc. than it is by the overall economy.
The US Economy is $14 trillion dollars annually. Even the largest businesses are only trying to get a very small share of the pie. And even if the whole pie is shrinking (a recession) the easy answer is just to steal a piece of someone else’s pie (market share). Easier said than done, for sure, but the truth is that companies are battling for market share all the time and every company needs to be doing its absolute best to attract market share regardless of the economy.
Too many companies blame the economy for a lack of business without asking themselves if they are doing everything possible to maximize business in the environment they are operating.
In some cases, a bad economy might mean hunkering down and watching costs in order to survive the economic storm but I tend to favor a more contrarian approach. If you have prepared for a rainy day, I think it is far better to spend extra resources to gather business during bad times. Slow economic environments tend to shake out the weaker players in any industry or marketplace.
This is why it is so important for businesses to have a reserve. Too many small businesses distribute nearly every available dollar to the owners during good times. This wouldn’t be that bad if the owners kept some it aside knowing that they might have to put it back into the business during slow times, but often it is tied up in illiquid investments or simply consumed. This leaves a business with little staying power when things slow down and these are the ones that don’t survive.
Understand the economy. Plan for bad times as they will certainly occur from time to time. But do everything in your power to maximize your business despite the economy. Take advantage of this fact and aggressively go after the competition. When things get better, you will be that much stronger for it.
If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to
your cash is flowing. know where.®
Copyright @ 2012 Homza Consulting, Inc.