Business is a state of mind, a mix of strategies and plans design to meet pre-set objectives and carefully implemented to generate economically driven returns on investment. In recessionary times, with low sales prices and volumes, production is slow sometimes to a dead stop, employees are tensed and stressed awaiting unemployment notices and shareholders are in the sell mode. It is under and in spite of these conditions that the well-trained and experience business mind thrives.Doing business in a growing economy seems easy. Customers have confidence in the economic fundamentals which gives them disposable income to augment purchases. Suppliers are market-driven offering fantastic terms and conditions to move large volumes. Employees are of the greatest concern because better (paying and working conditions) jobs are easily accessible. Competitors may also provide a challenge as the battle for market share heats up. Financing is cheap and easily available whether it is debt or equity funding.
At the first signs of plummeting sales, the business mind studies exactly why and takes action to avoid declining profits. Having set aside reserves from the growth period, the business can have six to ten months expense cover to implement survival strategies. Discontinuing unprofitable business models or product lines early can give the business additional cash reserves. Communicating to all suppliers, employees, bankers and shareholders about future business plans is essential to preserve these relationships.
The business mind will set out to redesign and strengthen the product lines. Using smaller unit packages that customers can afford or applying marketing (loss-leader or combination) strategies to sell the slow moving products along with fast moving complementary items. The business mind will understand that with less disposable income and in many cases no income, the business customers will decline drastically leaving product idle if no action is taken.
While the media reports factory or plant closures, the business mind sees bargains for new and used plant and equipment. Conventional wisdom supports and guides the purchase of fixed assets, during a recession, at cheap prices and placing these plant and equipment in storage until concrete signs that this recession is ending and it is needed. This investment in fixed assets is deliberately designed to complement the business post-recession plans and is financed out of operating cash flow as opposed to debt or equity funding.
As numerous layoffs occur worldwide and across multiple sectors, the business mind seeks an opportunity to reduce payroll expenses, renegotiate with workers’ unions and decrease new pension obligations, while keeping or attracting the best employees. While the business may not be able to keep all its present employees, it must prepare for expansion after the recession. Succession planning directs and identifies the key employees in each department or division that is of good standing to lead the business into the future.
Timing is everything in business.
Rationale
T.A.J & Associates Company Limited uses this occasion to comment on topics that have been covered, both academically and by the mainstream media, to add its opinion and point out investment opportunity, not to invoke any social action.
