Back in April of this year I posted a blog post on the results of the 2019 CEO confidence index and projections. I then researched information on the longest economic expansions in U.S. History. With the news these days concerning the economy and the slow down in manufacturing, I felt it was worth repeating again.
As part of my Vistage worldwide membership I receive their updates on the economy, and the CEO Projections for 2019 caught my attention. https://www.vistage.com/demand/2019-growth-projections-pdf-form/ It seems that CEO confidence in the economy has continued to decline into this year. Although CEOs expect revenues to rise and even profitability to improve for now, they see economic headwinds building and feel the pressure of rising wages and unfilled positions. “The challenge for CEOs in 2019,” according to the report, “is figuring out how to maintain growth in the face of a potential slowdown. In the March 23rdWall Street Journal it was reported that investor anxiety over the world economy has increased and there are concerns that this may be the start of a consistent downturn.
Recent headlines from the Wall Street Journal indicate that the economy is slowing down. For example:
- August 12th“The Turn in the Yield Curve”
- August 15th; “Stocks, Bonds Flash Warning Signs”
- August 16th“Consumer Spending Helps Offset Decline in Manufacturing Output”.
If you couple these reports with a look at some of the longest economic expansions in the United States since 1900, you can see that there probably is some reason for concern:
- The U.S housing bubble lasted 74 months (November 2001–December 2007)
- World War II lasted 81 months (September 1938–September 1945)
- Reaganomics lasted 93 months (November 1982–July 1990)
- Vietnam lasted 108 months (February 1961–December 1969)
- The Tech bubble lasted 122 months (March 1991–March 2001)
- Our current economic expansion, which started in June of 2009, is currently 134 months long, the longest in U.S. history.
Based on the current length of this expansion and the CEO Confidence Index and current headlines in the Wall Street Journal one might think we are looking at a slowdown in the economy sooner rather than later. We do not know exactly when, but a correction in the economy is coming. As I interact with owners of small to mid-market businesses I have noticed that they are feeling anxious over the uncertainty.
The good times can often make us complacent. I would like to suggest business owners embrace this uncertainty and choose to prepare now. Waiting to figure out what to do until the slowdown arrives is not the best approach. The Vistage report recommends preparing for what is ahead by focusing on these five areas, Leadership, Talent Management, Customer Impact, Improving Operations and Managing Your numbers.
- Leadership:Leadership is hard even in the best of times. In order to build a strong culture of the right people working effectively and efficiently, you need to be a strong leader. This requires clear communication on your part. Your employees will want to feel your confidence that the organization has a plan and can weather a downturn. It is important to open up the channels of communication to forestall speculation because what your employees do not know can hurt the organization. Knowledge prevents misinformation and disinformation.Communication and follow through increase trust; work on building trust throughout your organization.
- Talent Management:Hiring and retaining talent is one of the major issues that business owners are facing today. As a business, you have to retain the good people you have and hire additional great people from a reduced talent pool. How do you do that? By developing a strong culture and providing a great work environment Employee development is key, and so is vision and direction. Employees want to be a part of something bigger than themselves. Clarifying where the company is headed and having a plan to get the business there, will not only help to retain your good employees but will also attract other good employees.
- Customer Engagement:Business owners often wait for their customers to contact them, which is a mistake. Proactively develop the relationships with your customers—and do not wait for a slowdown to do so. The time to communicate with your customers is now, not when your business is struggling. Revenue growth is a proactive activity, meaning that if you want sales to improve, you have to be communicating more with your current customers, past customers and potential customers.
- Focus on Improving Operations:How can you make your current operations more effective and efficient? During good times businesses tend to build more complexity into their systems and processes (if they even have systems and processes). Start thinking about how to streamline operations, reduce waste, and get all of your employees contributing to the bottom line. How can you add more value to the value stream in your business? How can you make all your processes and procedures more linear?
- Manage the numbers:The numbers drive everything in your business; you need to know and understand them. Business owners need to manage their cash flow and understand the key drivers of cash in the business. I run into far too many business owners who are not paying attention to their financials. Some review their P&L and balance sheet on a somewhat regular basis, but few use them as a comparison tool and even fewer actually produce a cash flow statement to understand how cash is moving in and out of the business. Start to build cash reserves in your business now. Get to know your banker and start building the relationship now if you have not already done so.
An economic slowdown is coming. The question is when it will happen and how long it will last. The various aspects of your business are like links in a chain, and one weak link can make the entire chain weak. Now is the time to strengthen the links in your business chain to ensure you can manage your way through a downturn. Focus on these five areas to make significant improvements and be ready for when the economy slows down.
We are organizational development experts and we focus on helping small to mid-market companies strengthen all the links in their chains, reducing waste and adding more value to the value stream. This increases efficiency and effectiveness, improving bottom line results. Do not wait. Start preparing your business now. We can help. Give us a call: 503-312-3145
Books by Gary Furr Available on Amazon:
It’s Not Hard, It’s Business: 10 Keys to Revenue Growth
Make Your Banker Happy: 10 Keys to Unlocking a Good Relationship with Your Banker
- Vistage Research, CEO Projections for 2019: https://www.vistage.com/demand/2019-growth-projections-pdf-form/
- U.S. Bureau of Labor Statistics
- U.S. Bureau of Economic Analysis
- Patrick Bet-David: The Next Market Crash, YouTube November 2018