Change is great. We all love to see people try to improve things. Where would we be without adventurers and risk-takers? If you are in search of glory or wish to make a fortune, it obviously pays to be first. Nevertheless, during an economic depression, it can happen that early birds just get eaten first.
Prudence is crucially important
That does not mean that we should be
sceptical about innovation, but only that, when money is tight, it is
advisable to be extra careful. If you are running a business these days,
you are probably watching your cash-flow like a hawk. Well done. My
guess is that, right now, you need to make a major mistake like you need
a hole in your head.
Managing a company in recession mode
demands more of the ant than of the grasshopper in our souls. When the
market recovers, there will be plenty of time for taking bold risks. In
the meantime, a miser's frame of mind might be what you need to ensure
business survival. In my view, in difficult times, one should keep in
mind the following three principles:
Go for the easy catch
If you are running a specialist service
company in Minnesota, forget about the Chinese market for the moment.
Chances are that you'll be able to detect better opportunities if you
concentrate your attention on people next door. Transportation costs
money and communication takes time. In times of deep economic trouble, I
believe in focusing all efforts on the easiest markets and putting
aside, temporarily, risky expansion ideas.
Deliver high-quality work
If you are delivering services, such as painting houses,
what level of quality should you try to achieve? How often do you give
grounds of complaint to your customers? If your answer is never, you are
doing great. If not, that might be good news as well. Quality
improvements, as perceived by customers, often involve negligible costs
for business. Delivering impeccable quality saves you money. For this
reason, during an economic recession, I wouldn't recommend launching new
products with potential quality problems that might take you down
beyond hope of recovery.
Spend money wisely
An economic recession blurs the line between fixed and
variable costs, production and overhead. When money is tight, you need
to take immediate decisions about where your cash is going. Evaluating
every expenditure as an investment is a technique that brings about
outstanding results. Is your inventory going to make you a profit within
the next two months? Which steps of your process could be eliminated
without negative impact for customers? In periods of crisis, one should
eliminate investments in new technologies with long payback periods,
since they might eat up the cash that you need to survive right now.
you look around and see people going bankrupt, it is not unwise to
become risk-shy. Before you explore new countries, take a walk down the
street. Before you invest in new technology, make sure that you can
afford it. Before you take additional cargo, stabilize your ship. One
day, hopefully soon, the storm will be over and we will be able to go
back to plain sailing, bold innovation, and massive expansion.
For more information about rational living and personal development, I refer you to my book The 10 Principles of Rational Living
[Image by robstephaustralia under Creative Commons Attribution License. See the license terms under http://creativecommons.org/licenses/by/3.0/us]