As much as I would like to believe otherwise, we must plan for the worst and hope for the best with today’s economy. One need only read a newspaper, magazine, or blog to learn that the end may be at hand. Like all things, however, the truth lies somewhere in the middle.
The dire prognostications – There is information circulating that a number of small business were not able to survive the credit squeeze despite the actual viability of their companies, and this fear has caused many to pull back very aggressively as a defensive posture. This defensive posture has lead to order cancellations, layoffs, and outright panic. The recent release of retail numbers shows the worst performance in three years. The tech sector and, consequently, Silicon Valley are significantly reducing or eliminating funding in private placement investments. The defensive actions being taken by VC firms in the Silicon Valley may be the best barometer of changes to small business models due to the high percentage of private dollars being in play. A recent meeting at Sequoia Capital (a leading venture capital firm) sounded the alarm to their CEOs – pull back expenses, pare staffing, and only take cash on a must need basis. From this viewpoint, things could not seem any worse.
The flip side of the coin – I am not suggesting that the worst is over, but, moreover, one must also consider the opportunities that exist within this type of economic environment. The opportunities, however, are hidden beneath the fear gripping our nation, and it is important to take a deep breath and think about what you would consider an opportunity for your business. For some, that means acquiring a company, moving to a new office space, changing or adding a product, investing in research and development, etc. I recognize that everything I just mentioned involves spending money, but there are many companies and individuals who are in a position to partner, lend, or invest in a solid business. In fact, many pension funds have been investing more heavily in private equity funds than the stock market. Money is moving around, but, once again, investors and banks are being extremely prudent in where to place their money. When has a prudent investment decision ever been a bad idea?
The takeaway – The economy is not going to rebound overnight, but I think most have accepted that idea. It always makes sense to review costs, regardless of the circumstances, and making prudent borrowing and/or lending decisions, purchases, and investment decisions is always in vogue. Take time to think about the perfect of combination of opportunities that would help you grow your business – write them down and think about them often so that you can keep your mind open to what is happening around you. Opportunity is half luck and half planning, but knowing what you need and want gets you a good portion of the way. There is no doubt that there will be victims of circumstance in this economic cycle, but that is not a reason to sit back and wait to be one of them.
Kirsten Francissen – www.jkbayconsultancy.com