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Opinion: If a downturn comes, will you be ready?

The Strategic Suite

Posted online

Having a front seat at Springfield Business Journal’s Economic Growth Survey has been one of the most enlightening business experiences I’ve had. From reviewing data, to watching our team shape content with key business leaders and listening to their viewpoints, insights and challenges about what Springfield needs to grow, it has been eye-opening.

I am an optimist to the core. There’s something in my DNA that recoils at a pessimistic thought or idea. As I’ve aged in my career, I have continued to battle the idea of a “realist” as a pragmatic voice in business rather than the wet blanket I’ve always perceived.

That is why I was so excited to hear about the growth Springfield has experienced as indicated by SBJ’s Business Confidence Index. Through this amazing conversation among business leaders — people who I see as fellow optimists — one of these pragmatic discussions occurred. After 10 years of expansion, there could be a slowdown ahead. One presentation that impacted me the most was a point Richard Ollis made about planning for hard times during good times.

I may be a wild-eyed optimist, but I’m not stupid. I, too, lived through the 2008 recession. And, I was a sales manager for a newspaper company which was in the midst of massive disruption and the worst recession on record. It was the most difficult time of my career and through every gut-wrenching decision that was made, I vowed that I would learn from that experience. Councilman Ollis’ message hit home for me.

Jack Stack, CEO and founder of SRC Holdings Corp., said in August 2017 at SBJ’s 12 People You Need to Know that he wanted to have $100 million in the balance sheet by 2019. He and his team had been calculating an economic downturn in 2019. His words: “You want to be in a position that you are ready for a downturn.”

Guess what? It’s 2019 and you can spend a lot of time on the internet reading from experts that agree that if we aren’t in a downturn, we could be soon. Hearing Ollis’ advice and reflecting on Stack’s approach to a downturn raised a question about batting down the hatches while the sun is out: What would I do differently today if I knew a storm was coming?

1. Start with a revenue projection. Project revenue for the next two years. Start with the same percentage of losses experienced in 2008 and 2009 and plug that into the P&L. Then, create another model that averages those losses with the last two years’ trend, which will balance things a bit. Project profits based on today’s expense model. Ouch. While you may want to stop this exercise, it is important to continue because the decision-making process changes when you are in the grip of the storm rather than potentially heading into it.

2. Build up reserves and manage expenses. How much in reserves do you need to prepare to stay strong and seize opportunities?

3. Check your team. If you are going into the storm, how strong is the crew alongside you? Now is a good time to review your appraisal and feedback process, not to identify areas to reduce, but to assess strengths and proactively prepare your most important asset – your people.

4. Sharpen your value proposition. No time is more critical to know what makes you different than your competition. In a downturn, there will be less business on the table and your customers will be reviewing their choices much more closely. A smart plan could present new opportunities and position you for growth during the recovery.

5. Obsess about market share. What is the potential in the market for your business segment now and during a downturn? Comparing your share with your competition’s is a good starting point, and running your revenue projections from the last recession against the total market share will help put into perspective how much food is on the table.

6. Know your competition. You need to know more bout them than ever before. Then, redefine your competition because when there’s less food on the table, more threats arise from places you don’t expect.

7. Play offense when everyone else pulls back. Remember the recession lesson from Management 101 – the company that pulls back and circles the wagon loses significant share after the recovery. The company that plods ahead actually grows during the recovery. The company that plays a strategic offense has a better chance of winning the game.

8. Disrupt yourself. Your risk increases in a downturn because technology increases and businesses are forced to do things differently to survive. Review your weaknesses and disrupt your own business model. Remember, Microsoft, FedEx and Apple were born as a result of recessions.

Yes, I am a wild-eyed optimist trying to be a realist. But as I read these actions, I can’t help thinking, what if we don’t go through a terrible recession and we prepared like we did? Wouldn’t we be even stronger?

Springfield Business Journal Associate Publisher Marty Goodnight can be reached at mgoodnight@sbj.net.

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