Winter 2009: by Brent Banda, MBA

Strategy for an Improving Economy

There is a difference between an improving economy and a high growth economy. High growth is like drinking from a fire hose. In 2007 and most of 2008, labour was impossible to find and there was a lineup of customers at your door.

Consumers and businesses are cautious but positive. Companies are regrouping and reorganizing their businesses.

Skyrocketing revenues and thick margins hid operational errors and poor decisions resulting from tight timelines. Then of course the global financial crisis hit, and we consider late 2008 to have had an unfavourable economy due to uncertainty.

We are now entering an improving economy, characterised by a more comfortable growth tempo. Signs of a normal economy are returning, such as the fact labour is easier to find. But the real difference is attitude. Consumers and businesses are cautious but positive. Companies are regrouping and reorganizing their businesses.

Certain strategies work in an improving economy. Your business plan must work with the factors associated with this recovery phase.

Be patient.
Saskatchewan dodged an economic bullet, but we are recovering from a short period of low business confidence. If you sell to businesses, your customers are preparing to spend money on inventory, expansion into new product lines, and expansion of their facilities. Knock on their doors now, and be ready for when they choose to resume normal operations.

Expect less room for error.
Avoid mistakes when operating in an improving economy. You can afford to spill a few drops when drinking from a fire hose. But in an improving economy your customers are far less forgiving and are price sensitive. It's now time to properly plan and make careful decisions.

Fix problem areas in your business.
The growth economy caused serious problems such as underperforming employees or unnecessary overhead. Now is the time to replace underperforming staff, shave unnecessary expenses, and rethink how you organized and operated your business in the last few years.

Heal your customer's wounds.
Economic devastation is selective. The downturn hit some industries hard while others show no problems at all. Some consumers have been laid off while others feel secure in their jobs. Understand how your customer base was affected, and adjust your strategy accordingly. For example, if your customers are short on inventory, offer a re-stocking promotion. Partnerships built in hard times often lead into strong business relationships that last for many years.

Prepare for consolidation.
There may be a recovery in Saskatchewan, but many companies did not have the balance sheet to sustain any type of downturn. Companies that export will still be seriously affected as the world struggles in the next two years. Some of your competitors may fail. Consider whether you should purchase them for reasons such as acquiring their equipment, client base, proprietary product lines, or employees.

Prepare for new competitors.
In some industries, layoffs can result in employees starting their own businesses. These smaller operations will fight for the crumbs that you may now need.

Go green.
An opportunity exists with the green movement in business. A large portion of recent government economic stimulus is tied to green technology, which will filter into many areas of your industry.

Stick to your knitting.
Build on your strengths but don't diversify into areas that stretch your ability or are simply too risky. Depending on your balance sheet, this may not be the time to absorb the financial repercussions of a bad decision. For most businesses, this is the time to reorganize and improve on what you do now.

Cash is always King.
All businesses and consumers wrestle with cash flow, no matter the economic situation. Recognize the importance of flexibility when establishing how your customers will pay your bill. This is a period of change. People are reorganizing their personal lifestyles, and companies are reconsidering their vendors. Adjust your terms to help your customers.

Timing is everything in business. The strategies you employ in your business plan must work within the context of the improving economy.

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