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Growth: In The Least Likely Moment

Plan for the upcoming economic boom


October 2, 2008
By Patrick Astre

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It seems that way sometimes,
doesn’t it?  That the darkness of an economic slowdown will never end
until it swallows your business like a pelican gulping down a fish.

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Plan for the upcoming economic boom

“And the darkest hour,
Is just before dawn.”

Dedicated To The One I Love
– The Mamas & the Papas

It seems that way sometimes, doesn’t it?  That the darkness of an economic slowdown will never end until it swallows your business like a pelican gulping down a fish.

Well relax, that’s not the way it is. Good times follow tough times – it’s inevitable. They call it the economic cycle, and it’s been around since people started measuring such things.

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It’s just as important for a business owner to plan for the coming boom, as it was for them to prepare for the recession. But when do you start? How does one know it’s really over? 

There are no clear, defining lines from recession to boom. It isn’t like throwing on a light switch in a room. It’s more of a slow, gradual dawn lighting up the eastern sky, taking its time to arrive. We want to find trends, not sudden eruptions from good to bad. We want to go from bad to just a little less bad.

It’s different this time:  Sure it is, the cheque is in the mail and “you’re my one and only.”

Don’t believe what you hear from the economic pundits. Economics was invented to make astrology look good. In the late 1950s and early ’60s we had an economic boom partly based on new technologies like transistors.

The “nifty 50” stocks reigned supreme and surely it was different this time. Then along came the early ’70s and the Arab oil embargo. We were going to run out of oil in eight years, they said: it was different this time. Then we had the inflation and high interest rates of the late ’80s, the stock market crash of 1987, the ’90s Internet boom, the technology meltdown of 2000 followed by 9/11 and now the sub-prime crisis.

Every downturn was followed by an economic boom and vice versa. It’s never “different this time,” and this is no exception. So let’s start planning for the inevitable resurgence of economic growth with two questions:

  1. Are we at bottom?
  2. What business steps should we take if we are entering a recovery period?

OK, let’s look at the first one:  Are we at the bottom?

To answer that question we must first realize it’s a regional game more than a national one. Las Vegas may be in a boom while New York is in recession. As of deadline, home prices, which are one economic indicator, reflect this regional disparity. US News and World Report stated in their June 3, 2008, edition that home prices are up 11.8 per cent in Mobile, Ala., and 6.7 per cent in Jacksonville, Fla., from a year ago.

During that same period, the Washington Business Journal’s May 27, 2008, edition stated the Standard & Poors/Case-Shiller home price index fell nationally by 14.4 per cent. 

So, to figure out if we’re in a less-bad period, (no one can find the actual, exact bottom) look locally for the signs:

  • A surge in residential home sales, or at least a drop in the length of time homes stay on the market.  Best bet: Speak to local realtors.
  • Increases in new construction means builders are experiencing a demand that will have a ripple effect on the local economy (think appliances, local building materials outlets, etc…).
  • Decrease in vacant commercial properties and increase in commercial construction.
  • Easier credit from local banks.
  • Lower interest rates for mortgages and consumer credit.
  • Decrease in local unemployment.
  • Increase in “help wanted” ads.

All these signs, and more, indicate improving economic conditions locally, which is what matters most to you as the business owner. Once you see these positive signs, it’s time to analyze your business for the right course to take.   

Examine how your business did previously in times like these. You should be using a computerized accounting system. If you’re using an old paper system and doing your own bookkeeping, your first task is to change immediately. 

If you’re in a new business, this will not apply, but if you’ve been in business for a while here’s what to do: go to the report section of your accounting system and examine two sections for a similar period of time:

  • Sales by item summary. This will tell you what sold best for the equivalent recovery last time.  Similar items will usually do well.
  • Income by customer summary. Who’s buying your product and services during a recovery? Is it mainly commercial clients, individuals, young, old, blue collar, professionals? This is crucial so you can target your marketing toward those clients.

Now apply the particular and unique aspect of your business to this information. Factor in changes to your market since the last boom time:

  • Has technology changed? Don’t stock up on VCRs when DVDs are the rage. The pace of technological change can be daunting sometimes. Be sure you’re not caught using outdated technology in booming times.
  • Have the demographics of your market changed? Do you have younger buyers instead of older ones, families instead of singles, and industrial/commercial as opposed to individuals? Such changes in your market will require different sales strategies, pricing, inventories, etc.
  • What’s the competition like now? At the risk of sounding ghoulish, look around for a competing business that didn’t survive the recession. Move aggressively to grab the market shares of moribund competitors. Likewise, be aware of aggressive competition and match them blow-for-blow.
  • What are the factors unique to your industry? Some industries thrive in recession and don’t do as well in recoveries. Look to the unique aspects of your industry.
  • Loosen the purse strings a tad. Now’s the time to increase advertising and marketing, add to inventories, hire sales people. Be cautious, but move forward.

So there you have it, the basic steps to take advantage of the coming economic expansion.

And remember, when things are looking super good and it seems like this boom will never end … that will be the time to prepare for the next recession.



Patrick Astre is a Certified Financial Planner, Enrolled Agent and Registered Financial Consultant. He is also an author, speaker and a recognized tax and financial expert specializing on the economic issues of longevity. As the founder of Astre Planning Inc, Patrick has been advising individuals, small businesses and corporations for nearly 40 years. He is the author of, “This is Not Your Parents’ Retirement,” as well as “Educated Investing and the Four Seasons of Money.” For more information, contact Patrick at 1-631-744-9100 or visit www.ProsperousBoomer.com.

Don’t let growth catch you by surprise

Although you work hard to grow your business, it can sometimes happen when you least expect it.

“Growth can bring you many benefits, including decreased costs due to economies of scale, increased personal wealth, enhanced business reputation and improved access to financing,” says Rina Pillitteri, national director for small business at RBC Royal Bank. “The key is to effectively manage this growth, even when it catches you by surprise”

Here are some tips to help manage growth in your business:

  • If the growth is only temporary, there are short-term resources such as outside services or facilities available to you.
  • If you expect the growth to be permanent, you’ll need to create a long-term business plan as quickly as possible. Make sure it addresses processes and resources that are needed to meet these higher demands.
  • If you need more time to establish permanent resources, wherever possible, try to stretch your timelines or temporarily slow down other areas of your business until you get these set into place.
  • Stay profitable! You don’t want to let your business become overextended while you try to meet unexpected demands. Look into alternative sources of cash – speeding up your billing processes, using personal capital, tapping into emergency funds or borrowing.
SOURCE: News Canada