Emerge Stronger From The Downturn

“The Next Recession Could Happen Sooner Than We Think” warns Randy Brown in Forbes.

Jeff Kearns of Bloomberg writing in Money gives us a date: “Next Recession is Coming by 2021”

My personal theory is that what goes up eventually comes down.  The good news is that so far every time it’s fallen, the economy has rebounded…sometimes quickly, sometimes not so quickly. (Unfortunately this same rebound hasn’t happened to a few investments I made where once they hit zero they got stuck. But this is a story for a future missive.)

I have a wonderful client that has kept me around since before the 2008 recession.  Today they are much bigger, much stronger, the industry leader, and as a result, nicely profitable.

Why? Instead of closing his eyes to what was happening as the recession began, the CEO decided to use the coming crash to strengthen the company and prepare to be the best when the inevitable upturn began. Along the way, the company did their best to kill off competitors that were catatonic with fear and otherwise acting in ways that hastened their death.

When a recession or even just a big downturn arrives, many companies do exactly the wrong thing. They hunker down and prioritize short term actions over long term fixes. They become reactive rather than proactive. Instead of getting ahead of what’s happening and taking the opportunity to cut away the fat, improve operations, simplify activities, and develop better and more efficient ways to work, they’re playing defense as their company slowly fades away.

Even before the recession hits many companies are preparing themselves to be run over. Not intentionally, of course, but by their inability to face reality as the news gets worse and first signs of slowdown appear. They hide from the facts and pretend that if they just ignore what’s happening, it will pass them by. I’ve seen companies do this right up to the minute they shut their doors…forever.

Great companies take action right away, making changes and adjustments that will enable them to survive and even thrive through the troubles to come. They use the warnings of economists as rallying cries to get the troops enthused about winning the war to come. The war to grab an expanding piece of the shrinking market they will live in.

My client fought the war successfully. In the process, they shrank a bit, but they used the slowdown to re-engineer their company, to re-design their factory, and design some new products. In this way, they kept their skilled people employed and positioned themselves both to operate on reduced revenues and leap forward as the economy improved.

It wasn’t easy. I was in meetings where the leadership team expressed concerns about their financial situation and wondered how long the bad times would last. But I was never in a meeting where they weren’t united in the belief that they would emerge stronger.

The whole company noticed how leadership acted and took confidence in the words of encouragement they continually expressed. Everyone was aligned in their belief that they could win the war and before too long everyone would enjoy the good times to come.

As you read the reports and see the signs of a slowdown upon us, what are you doing? Working hard to prepare and devising ways to take advantage of the downturn to become stronger, or just hunkering down, hoping for the best, and talking about how economists have no idea what they’re talking about—their sales this week are just fine.

Don’t be like the people who think that because we’ve had a ridiculously cold–historically cold–winter across much of America, climate change is overblown or even a myth. Be like the US Navy which has noticed the waters rising around them and is working hard to ensure their bases will be prepared to survive however high the water comes so the sailors and ships have a home to return to after a long deployment.