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Expect Success June 22, 2009

Posted by Jason in Insider's View Relapses.
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Congratulations are certainly in order for any business still surviving—if not thriving—now that some industry sectors have begun to level off and become less volatile. The government’s largesse doesn’t hurt either. Apparent success notwithstanding, most of the firms that I have spoken with recently are still “seeing how the next few months work out.” Unfortunately, this is counter to good business practices. In fact, those firms that have managed to make it this far must be doing something right, even if some simply do not know what it is. The best firms, however, have actively implemented decisions that are most likely to foster positive outcomes. Contrary to those that struggled through the last year, who wish they would have been better prepared for the downturn, the best managers are now making preparations to recover. Are you in this group?

Now is a good time for scenario planning to establish an expectation of success, rather than react to the next few months. First off, if you don’t expect to be successful—whatever that means to your business—then you are not running a “going concern.” Assuming that you already have some strategic goals in place and are providing feasible targets for the staff, you should be asking, “Are we ready to handle the number of clients, projects, and employees that are required to operate at that level?” and “What will we do with the resulting revenue?” If your firm is not prepared to handle an influx of cash, you could be asking for even more problems. Just because you may return to “normal” does not mean that the last several months can simply be undone or forgotten—especially if you had to cut staff.

Consider this scenario: Your firm has been doing well promoting its services to new prospects. Though small, your staff is motivated and understands the importance of client relationships. However, the company has never been considered “the best” and you have looked to your competitors for ideas on innovation and new markets. Fortunately, through some valuable contacts and good timing, several decent projects are being considered, and you have submitted proposals that could potentially return the firm’s revenue back up to its 2007 level. The downside is that you had to cut some critical employees to make it this far, and two of your smaller competitors folded entirely. You are in the somewhat challenging position of meeting 2007 revenue targets with 2009 staff. In addition, you can no longer use your competition as a “canary” to judge how you should approach this new environment. What now?

This is where the value of scenario planning comes into play. How will the existing staff react to the additional workload? Will the additional revenue go toward overtime and bonuses that were cut in 2008? Will you pay down debt or increase training, software, and marketing expenditures? As you review your options, there is one important point to keep in mind: If you simply restore the firm to its 2007 configuration, you are ignoring that that is what necessitated cuts in the first place. What will you do in 2015 when it happens again? Now is the time to think through some of these decisions and plan for the future, before you become spoiled by your “excess” wealth.

Virtually every firm had to modify its plans, or at least put an asterisk next to some of its goals. The business environment simply wasn’t conducive to many firms’ growth projections. In any case, you should be reviewing your strategic plan and determining how the 2007-2010 time span may affect your path. If your growth was to be 8 percent per year, will next year’s growth be based on this year or will you have the aggressive goal of “skipping ahead” and using 2007 as a basis?

Your clients and peers want you to be successful. They also want to do business with those who can manage their own affairs as well as provide competent technical solutions. If you are in the enviable position of remaining strong while your competitors have fallen by the wayside, you have an excellent opportunity to showcase your business practices and maybe even assist your clients with their own preparations. Don’t waste the diminishing time that you have available before the work returns. Act quickly to anticipate the coming recovery and position your employees and financial resources accordingly. And then get ready for the next one.

— from Insider’s View, June 2009

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