Herman School of Business
Looking down the road.
Last Tuesday morning I had rotator cuff surgery. Hence, there were no blogs last week. But through the pain and the fog from the pills I watched the stock markets of this country reveal loads of information if you choose to learn it.
People. Listen up, my mantra about debt being a cancer is coming home to roost. And you better start crisis cash management if you want to survive and thrive. If what your business does relies on borrowing money and then hoping what you do with it will go up in value enough to make you a profit later, then you are in for a rude awakening. Now, I am not calling a stock market “top” or predicting a crash. But I am listening to the loud and clear message Wall Street is sending.
Your house will be worth less in twelve months than it is now. So if you intend to sell it, cut the price to whatever it takes to get a buyer and count your chickens. Those who hold out will lose even more than you will. If you are paying high interest on inventory or receivables borrowing you better start cutting costs now. Downsize or die. Now, more than ever, you better pay attention. Conserve cash any way you can because if your income depends on what Americans spend on your product or service every indicator says that with a shrinking economy, and a shrinking dollar, there will be less money in the game for you to receive.
I once worked with one of the largest car dealers in America. He sold tens of thousands of vehicles a year. Whenever a slump occurred, he just kicked up his advertising. During that recession no amount of advertising could create buyers. Because buyers had no money and couldn’t go further into debt. Instead of cutting costs and waiting out the reality of lower sales, that owner spent his way into bankruptcy because he wouldn’t accept that what worked before, wouldn’t work again.
Do not overpay right now to take over a competitor, make any deal reliant on his sales level continuing, or see that the price adjusts downward with his coming loss in sales.
Now, this also means coming opportunities. For the business owner or founder who provides goods and services people can’t do without, or need even more when times are tough. Look at what you do right now. Is it ramping up or down in the real American economy, not the economy you wish we had? The rich are going to get richer because they don’t play with debt. Those struggling will get worse or collapse because the math will wear out their ability to survive. Since you will either want your business to make it through the coming struggles, or hope to even prosper, then you better realistically assess your own situation. For the next 12 to 18 months, for most of America, there will be less to spend on what you now offer. What are you going to do about that?
- Posted: 21 October 2007
- Comments: 0
- Category: Business failure
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