New Norm

by

3 Key Findings of a Major Investment Strategy Firm

I recently received an invitation to review the forecasts of an investment firm and research company as they saw things developing in 2012. It shared three key findings.

It would be weird to say that I was overjoyed at reading these findings as they’re not particularly positive, but I was justified in my own assertions that this bear market isn’t going anywhere and that we better prepare to navigate it successfully or fall by the wayside.

I want to share each of these 3 key findings with you in my own words.

1. You’re going to have to do a lot to get a little. That’s been the case for a while now, and it’s not going away any time soon. Count on four years, and don’t be surprised by six. Because it’s just not going to get better out there, that means you have to make things better for yourself by ending waste, embracing austerity and adjusting to this New Norm. As I list those three objectives, I smile to myself because they’re each different yet at the same time they’re all faces of the same die. Evaluate your situation in business and at home and take actionable steps to make your money and efforts last longer.

2. Stocks have been lousy for a while and bonds are following suit. If you thought things were going to get easy, think again. Do you know the saying, “when life closes a door, it opens a window?” Well, in this case, when life closes a door, it also nails the window shut. That’s not a reason to panic, but it does cause me to conclude the following, which, incidentally, is similar to finding 3: “You’re going to have to make your own doors.”

3. It’s trite but true: Cash is King (read parts One, Two and Three of Vic Taglia’s series on the subject). Cash is also the number one asset of a turnaround professional. If there’s no cash, there’s no payroll, there’s no business and there are a lot of angry creditors chomping at the bit to get a piece of what’s theirs. As a business owner, it’s your job to do what you need to do to generate cash flow. There’s little in this world that I’m better at doing, and I’ve even shared one of my best tricks with you before. If you want investors to stick with you and your company, you’re going to need to learn to seek non-traditional ways of staying profitable and maintaining cash flow.

I wasn’t shocked to review these findings. Heed the cautious tone, and start thinking about what you can do differently to keep your business ahead and growing. If you’re already experiencing challenges, face your harsh reality, and start thinking creatively. It’s going to be a long and bumpy ride – but I’m here for you.

What do you think about these ideas?

by

6 Questions to Ask Yourself to Face Your Business’s Harsh Reality, Part 2

Last week we discussed the first 2 questions you should ask yourself to confront your business’s harsh reality, which you can read about HERE. This week, we’re going to ask ourselves the next two questions your should be asking.

3. Am I leading by example and delegating to the right people?

Employees follow the example of a company’s leadership. A huge part of being a good leader is knowing how to share responsibility and credit, and ensure that your managers are setting good examples for those who work with them.

All CEOs have egos. How they survive a troubled situation depends not only on their work ethic and ability to set those egos aside, but also the perception by others of these factors. If employees see you put cash straight from the register into your pocket, they will consider that acceptable. If they hear you bad mouthing clients and customers, they will consider that the company’s attitude – and follow suit.

Part of leading by example and delegating is recognizing that, at some point, all entrepreneurs need to either hire a professional manager or become a professional manager in order to reach the next level of success. Typically, entrepreneurs that don’t make this leap are those who ultimately call upon turnaround management professionals.

4. Am I constantly reacting to business issues, or am I being proactive to minimize problems?

Being a reactive business manager won’t work in the long run. You’ll be distracted and putting out fires rather than creating value. You need to be proactive about your product line, financial state, management challenges and business. If you see obsolescence of your main product line and don’t look for substitutes in order to stay profitable, then you’re not a good manager.

Consider the case of General Motors. They allowed their car lines to get stodgy and produced something the consumer didn’t want. Rather than proactively changing the way things were being done at GM, the company didn’t face the harsh reality of its situation and reacted by filing bankruptcy.

On the other hand, there’s Apple. They evolved their product line even before they saw obsolescence with existing products. They invest heavily in R&D, a very proactive approach.

Be proactive – not reactive.

Get ready for next week, when we’ll learn the final 2 Questions we should be asking ourselves in order to face the harsh realities of our business’s situation. Until then, share the kinds of questions you ask yourself about your business in the comments below.

by

The New Norm is Becoming the Norm

How long is something new before it just starts being the status quo?

It’s been three years that our economy has been like this. I predict another 5-7, which could get stretched out to 10 years before we get back to a pre-2007 economic climate.

I’ve been saying for a while that we’re headed for another recession and that the economy is going to be flat for the next 5-7 years. By definition we can’t have a double-dip because we’ve had two quarters of growth.

But we keep getting held back from further recovery due to our own folly and the interconnectedness of the world economies.

The stock market has dropped 3.5%, giving up all of its upside for 2011, and no one could predict the tsunamis or the nuclear fallout in Japan. Another episode in Europe or elsewhere could put the U.S. right back on its butt (if we haven’t already tripped and we’re just in that pre-getting it state before we wind up on our butts).

If you read the papers in the last couple of days, you heard that the knocked-out power-plants that were supposedly controlling only 5% of of Tokyo were actually controlling as much as 25% of the electricity in Tokyo. This has slowed and will continue to slow Japanese manufacturing and business dramatically. Due to the Japanese “just in time” inventory method that most modern businesses have gone to in the last 15-20 years, Japanese auto makers in the US and others in the manufacturing sector are going to be slowed down. This will only further exacerbate our own recovery.

Who knows how far the Japanese market will go down at this point, and the more problems that arise the more this market will spiral. This will affect us.

Why am I throwing all of this out? No, I don’t like dread and doom. I like facing reality, and I’m sharing this because the recovery is going to get stretched out more and more and problems compound problems.

So what do you need to do? You need to prepare yourself and your business for this situation.

It can be hard to change because change is hard. But you need to look at what you can change to be proactive, even if something’s been working for 20 years. It may not need to be the product itself, but it may need to be your manufacturing processes or something else that let’s you stay ahead of this curve.

Separate the emotions, and look for practical solutions.

And beware the alligators. They may already be chomping.

What do you predict for the economy in years to come? How soon will a full recovery be in effect?

by

6 Questions to Ask Yourself to Face Your Business’s Harsh Reality, Part 1

Over the course of the next few weeks we’ll be fleshing out 6 questions that every business leader should be regularly asking himself or herself.

These questions will help you to confront the harsh realities that all businesses and their owners face, thereby allowing you to protect and grow your business more safely, efficiently and profitably.

1. Am I adjusting to the New Norm or am I being complacent with business as usual?

The New Norm, as you may have heard, is the result of the downturn in the economy in the last 3 years. Some pundits predict a flat economy for as much as 3-7 years as we absorb severe decline in real estate value, credit card debt, unemployment, high energy costs, foreclosures and more. As the leader of your company, it’s your job to adjust your business accordingly.

In order to avoid complacency and being lulled into a false sense of security, take concrete steps towards streamlining your business to operate most profitably. Consider fewer fixed assets and more variable ones. For instance, leased or rented assets, instead of purchased ones, can make your business more flexible. On the other hand, if you can take advantage of competitors’ mistakes by acquiring equipment or inventory for $.20 on the dollar or of the tremendous amount of excess rental, warehouse and manufacturing space all over the country, this might be a great opportunity to do so.

As you think about these issues, consider your business plan and model. Should it be updated based on the New Norm? The answer to this isn’t always “yes” but it does deserve consideration.

2. Am I leveraging my banking relationship to enhance my business’s future?

Know your banker, and be prepared to call on him during difficult times. Establish credit by borrowing and repaying loans consistently, even when you don’t need the money. This way, you’ll avoid having to establish a new banking relationship or credit when you really do need a loan. In addition, it reflects well on your character to establish this credit, inducing your banker to work with you.

Don’t borrow to supplement negative cash flow. Borrow to facilitate operational needs and to establish your credit. The money from a loan could help you take advantage of a great opportunity, like acquiring equipment at a low multiple, or taking advantage of and buying out a failing competitor.

Just make sure to leverage your banking relationship now for banking issues that occur in the future.

Next Wednesday we’ll talk about the next 2 Questions we should be asking ourselves in order to face the harsh realities of our business’s situation. I’d love it if you shared the kinds of questions you ask yourself about your business in the comments below. Read Part 3 HERE.