Economic Challenge and Opportunity
It is obvious that we are faced with economic change every few years. Perhaps the most puzzling aspect of these changes is that so many of us seem to forget the last time. Forget that we live in cycles. React as if this is a one and only event and that the current climate will exist forever. Until recently the attitude was that growth would continue unabated forever and all investments are guaranteed. Now the attitude seems to be that the doom and gloom will never end.
For those of us who make our living in the commercial construction industry, it’s even more frustrating. Reading and listening to economic forecasts, one would imagine that there are only two industries in our economy, financial and residential housing. When is the last time you read about the commercial construction industry in discussions regarding the national and international economy?
As leaders in the commercial construction industry, we have to analyze what is happening in the economy as it relates to our business. Some of our members are deeply involved in the residential aspect of the economy, for them, times are particularly uncertain and perhaps perilous, but, this too will change! Times of uncertainty should dictate a return to business basics. Learn from the “bust” of “The Dot Com Bubble”.
Develop a sound short term business plan based upon the current reality. Long term plans are important, but, a solid short term plan is needed to deal with the next twelve months.
The Top Five Areas of Concern should be:
- Reduce debt and control spending.
- Reduce fixed overhead and replace with variable overhead where possible.
- Carefully review your market focus, expand and solidify key products and markets and reduce or eliminate peripheral costly secondary products and markets, for now.
- Focus upon key accounts to be sure they are properly serviced and pleased with your attention to their needs. They are also dealing with the current economy and will probably require a more flexible approach to their needs. Now is the time to build even better customer relationships, perhaps open new accounts.
- Watch your market for short term changes and be ready willing and able to change with them.
Keep in mind that this is a cycle, it will change, and the challenge is to be flexible enough to deal with today’s reality without overlooking tomorrow’s opportunity.
So often companies “burn bridges” during stressful downturns in the economy, resulting in difficult customer relationships when the market recovers. Take this opportunity to improve your communication with clients, remember, you are all part of the same team.
Our business cycles tend to follow personal financial cycles. While in the midst of a down cycle we tend to forget that it does end. Daniel R. Solin, author of ‘The Smartest 401(k) Book You’ll Ever Read,’ recently stated:
“No one can predict the future. However, historical data tells us that over time, markets increase in value. In the past 50 years, a globally diversified portfolio of stocks has never posted negative returns for a ten year period. Our markets are also extremely resilient. On October 22, 1962, at the height of the Cuban Missile Crisis, the Dow Jones industrial average was 573. Six months later it was up 25%. It was up over 15% six months after President Kennedy was assassinated and over 18% six months after 9/11. Remember, the market has bounced back after troubling times before and it likely will again. “
We have to remember that our companies are the economy. Our companies and employees have the ability to set the tone for the national economy by our attitudes, actions and investments. Think of the millions of people contributing daily to the commercial construction sector of the economy. Owners, Architects, Engineers, Manufacturers, Contractors, Distributors, Independent Manufacturers’ Representatives, Lawyers, Bankers, Investment Specialists, Advertising Agencies, the list goes on and on.
We have a large degree of control over the destiny of the national economy. People are always asking each other “how is the economy in your market?” “What do you project for the near and long term future?” Our answers are important; we can and do have a direct effect on the direction of the market. An inward and outward positive attitude is as contagious as the negative attitude proffered by the news media. If we believe in the future and share this sense of optimism with our peers, it will result in a spreading positive attitude that can and will enable the economy to remain strong.
This downturn will end; will your company be ready for the next upturn in the market? It is quite easy to manage an organization during a growing economy, but, the truly successful organizations have the understanding and flexibility to “change with the times”.
William L. Shannon CSI, CISCA
President of Shannon Corporation
Recipient of the 2004 De Gelleke Award