Are You Ready for the Rebound?

After ten consecutive years of unprecedented U.S. economic expansion in the ‘90s, things came to a quick halt in 2001. If the average American economic recession lasts about 11 months, this would suggest that by mid-2002, we should see signs of an improving economy. However, one must recognize that spending in many industries tends to lag slightly behind the rest of the economy. Plus, some economists are now telling us the term recession is actually too strong in this case.

What does this mean to you? These are turbulent times, and the more you understand relevant market conditions, the better you can understand the potential factors that may impact your particular business. The key to dealing with the inevitable ups and downs of business isn’t in predicting the future. It’s anticipating it and being more effective than your competition at adapting to it.

Most mid-sized businesses react to the day-to-day challenges. Very few develop and document tactical plans that will position them for competitive advantage.

Consider these questions as you think about your company’s ability to anticipate and adapt in these turbulent times:

Are you a highly adaptive organization that responds very quickly to market changes? Do you tend to beat your competitors to the punch with new services, better margins and better hires?

Does it take too long for you to implement changes in your business? If you answer yes, you might be a candidate for more market forecasting, strategic planning and operational improvement. You need a system, a process, for anticipating market changes better. Plus, you need leadership skills that provide the structure for more swiftly and profitably capitalizing on your new insights. Here are some additional questions and thoughts:

• Do you have a reliable warning system that forecasts when revenue may drop or go up? Does the warning information come early enough that you can adjust your business in time to profitably adapt to the impending circumstances? Does your forecasting system include information on customers, competition, employees and regulatory factors? Does the information drive your organization to action?

• Are you ready for the rebound headed our way late in 2002? Have you adjusted your marketing and sales activities the past few months to be prepared? Do you have the capacity and caliber of people you need to land the prized clients or engagements? Do you have the ability to manage the process well, reach your profit goals and simultaneously delight your clients?

• What are your top managers reading? High-performing managers have a few common attributes. Among them is a willingness to be strong students of the business of their specific industry. They never stop learning, never stop reading, and would never be caught uttering, "We’ve been in business for X years and we don’t need a market forecasting system or strategic business plan." They know better.

• How quickly can you measure change in your cash flow and financial position? Are you communicating appropriate key measurements to everyone in the business on a regular basis?

• Does your company know which customers are profitable and which products/services are profitable? Do your assumptions include indirect costs? Frequently, customers who buy a lot may also be significantly consuming customer service, engineering, and management time. They may not be as profitable as you think from looking only at gross margin information.

Obviously, there is no crystal ball. So, rather than trying to predict the future of your specific industry, focus instead on anticipating and adapting. Spend less time fixating on statistics and market research data and more time thinking about making specific plans for adapting profitably.

Jim Lamb is director of consulting for the Kansas City office of RSM McGladrey, a national accounting and management-consulting firm. He can be reached at jim_lamb@rsmi.com. Tom Emison of RSM McGladrey’s Minneapolis office also contributed to the article.