IS THE RECESSION OVER AND HOW WILL WE KNOW WHEN IT IS?
Does this sound familiar to you?.... Barry Knapp, a strategist at Barclays Capital, wrote recently that the economy appears "to be in the sweet spot of a recovery" and that the recession may have ended last month, according to Bloomberg News. Or how about this...“The economy is on a pretty good track on the recovery side and inflation is not a problem,” said Nariman Behravesh, chief economist at IHS Global Insight in Lexington, Massachusetts, who correctly forecast the increase in consumer prices. “The Fed can be pretty relaxed, at least for the moment, and focus on making sure this recovery is sustainable.” – Bloomberg News
Amazingly, the first economic forecast was a Lead Item in ABC's News coverage back on May 12, 2009 and the second was on December 18, fully seven months later! Clearly, no one has a definitive answer as to whether the recession is over or even when it will be. But, there are many increasingly positive signs that the worst is behind us and we're on the road to recovery, both in Canada and the US. Here are the key indicators that most economists and business people agree we should monitor, together with their current rating: Gross Domestic Product (positive) • Manufacturing Output (positive) • Housing Market (booming in Canada, positive in the US) • Inventory build-up (positive) • Consumer confidence (fair) • Employment (fair) • Inflation (positive)
We strongly recommend that business owners and managers focus on these indicators, and let economists continue what is now an academic but seemingly endless debate.
While businesses of all sizes are forced to cut costs as they face substantial declines in revenue what and how they cut is equally important for their future and sometimes, even survival. Michael Dell, founder of Dell Computers, in an interview with Inc. magazine, advised small businesses to keep an eye on productivity and excellence - and possibly even opportunities for small business growth, even amidst all their recessionary cost-cutting. As he so aptly put it, "If all you do is cut costs, then you have nothing left."
It's good advice but unfortunately too many businesses make the mistake of cutting costs in areas which often are vital to "pulling through" a recession and being well positioned to forge ahead during a recovery. Some areas where management should think very carefully before wielding an axe are: Marketing and Advertising dollars, Sales people, Training, key managers, supervisory or technical staff, Customer Service and Technology.
This is a real life example of what can go wrong... over the past year and a half I have been assisting a major Canadian company with transitioning managers and employees who have been released as part of a massive restructuring program. A few weeks ago I was surprised to learn, in discussions with a manager who was "down-sized", that with her departure there was no one left to run the department... which performs a very critical, high value technical service for customers!
"WHEN THINGS GET TOUGH THE TOUGH GET GOING..."
We've all heard this saying and most of us probably think its a good prescription for how to deal with business setbacks. Unfortunately, in a recession as deep and severe as the one we're emerging from, business owners and managers sometimes don't know where to begin. Many who do know and who've acted effectively have done very well. "In a recent survey, about 30% of [small] businesses reported that they are in fact doing great and have even increased their profits this past year" - New York Times, December 3, 2009.
Here are some of the strategies pursued by top performing businesses during the recession:
• Focus on value and sell quality products and services at very competitive prices
• Outsource non-core operations, technology and customer service to low-cost providers
• Use of job agencies to reduce staff related overhead and for flexible scheduling
• Implement low-cost, high return Marketing i.e. web-based advertising, blogs, social media
• Expansion into new geographic markets, including overseas
Phil Richardson, President
BizGrowth Coaching Inc.
