I guess it can be said without much debate now that we’re in a recession. That’s two consecutive quarters of a shrinking gross domestic product, and we finally had the first one in the third quarter of 2008. If the fourth quarter doesn’t follow suit, it will be about as shocking as the Detroit Lions showing up at the Super Bowl. (And I don’t even think they’d be allowed in with tickets.)
Some people thought we were in a recession a year ago, mainly because the Associated Press kept running stories with headlines like, “Are We in a Recession?” And even though we weren’t (yet), the writing was so bad that no one could get deep enough into the story to find that out.
So now that it seems to have finally happened, there are a few things you’ll need to know to get through it. That’s where I come in. How do you survive troubling business conditions? Ask me. I’m a walking troubling business condition. I’ve imposed so many business hurdles on myself and my company that there’s practically no such thing as smooth sailing around here.
That means I’m now in my element. You’re fumbling around like Superman suddenly forced to wear a kryptonite blindfold. I have one that’s custom-fit and well-worn. So here’s what you need to know about doing business in a recession. Work with me here and I promise you’ll be fine—perhaps not enormously prosperous, but fine.
Your assets have no value. Repeat after me: Your assets have no value. The sooner you figure this out, the better. Look at your balance sheet. See where you listed the value of investments, pension funds, furniture, fixtures and holdings? Ha! It’s all worthless! The reason it’s worthless is there’s nothing you can do with any of it. You can’t convert it into cash, at least for anything more than pennies on the dollar, and if you can get 10 guys on Wall Street to stop freaking out for a second and value it for you, you’ll get 10 different answers. That’s not entirely because of the recession.
They were pretty much always wild guessing. It just never occurred to you unless you read this column with regularity that they’ve never had the slightest idea what they’re talking about. You figured, “They wear white coats!” (Bought those at Wal-Mart in the laboratory accessories section.) “They throw paper around!” (Didn’t you do that in third grade?) They. Know. Nothing. Like Sgt. Schultz. So you can’t base any decisions on asset-valuation, because there’s no such thing, and you have to plan all your budgeting on actual income. This is shocking, but you’ll come to find it’s liberating. It’s a good thing.
Fire everyone. I mean it. It’s good for you and not that bad for your employees. Since I know you’re a humanitarian, your first instinct is to find other places to cut and do everything you can to avoid lopping off heads. Wrong. Lop. Here’s why. The sooner an employee realizes he or she has no job security, the sooner the employee’s mindset will adjust to the notion that he or she has to think in a more entrepreneurial fashion.
If you’re spending so much on salaries, wages and benefits that your revenue can’t cover it, they have no job security. But you just told them you’ll move Heaven and Earth to keep them employed, so they think they do. You didn’t help them by doing that. Give them two weeks’ notice if you can stretch yourself that far, and then just be done with it. Stop weeping like an 8-year-old girl and asking yourself, “What will become of them?” They’ll figure something out, that’s what. You thought they were smart enough to deserve to be hired, didn’t you? Then they’re smart enough to solve this problem. Swing the axe. You help no one, least of all them, if you delude yourself and everyone else into thinking you can survive when you don’t get your costs under control.
Don’t pay your bills. I don’t mean you should never pay them. And if you have the cash, by all means, stay current. But you know that tricky conundrum about how you’re busier than ever but money doesn’t seem to be coming in like it should? Why do you think the customers who normally pay you in 30 days are now stretching you to 60 and 90? Because their customers are doing the same thing to them. And so on and so on.
Are you going to be the hero that bravely stands in the gap and floods cash into the system at all points below you? You’re a great, fine and virtuous person! You’re like Henry Paulson with hair. And what good is it doing you? If you live and die by cash flow, this is insane. Running short of cash means you have to borrow it from somewhere, and that costs you interest and that’s no good. So unless you can do this without your customers doing it for you, tell your suppliers they’ll just have to wait. Oh, and speaking of your suppliers…
Don’t buy stuff! There are certain things about recessions that are great. One is they force you to really think about some of the stuff you spend money on, like those specialty advertising trinkets like pencils and mouse pads with your company’s name on them. You do understand that this crap doesn’t sell anything for you. (Oh, and no one uses mouse pads anymore! They’re going the way of the desktop PC.) The water cooler? Buy each employee a six-pack of bottled water and tell them they can refill the bottles and keep them in the fridge. Your “wardrobe consultant”? Pick out your own clothes, you pansy! The guy who helps you write your “corporate blog” on your website? The one you last updated on April 21, 2007 by writing, “We have a lot to be excited about at the company today!”? Yeah, stop paying him $500 a month.
Seriously consider just ignoring everything I’ve said here and run your business the same as you always do. As it’s become popular to say, don’t participate in the recession. If you’re smart enough to find the markets that need your product or service, and you execute well enough to satisfy those markets’ needs, you certainly don’t need to listen to a doofus like me. Onward!
