Here is an EXCELLENT short-list of action steps for the rest of the economic downturn heading into recovery:
- Love your customers. Get closer to them than you have ever been; understand and aggressively address their issues. In a poor economy, competition will increasingly be based on price, so that you need to be able to articulate your value proposition in order to justify holding your prices above the competition’s, or to be able to just hold on to the business;
- Love your bankers. Communicate with them; let them know what you are doing. Convince them that you are thinking about them and you will do whatever it takes to make sure their loans are repaid. The biggest mistake companies make with bankers is not staying in constant communication with them and then at the last minute surprising them with bad news. Debt will be difficult to obtain so make sure your credibility and communications are in place so that you will be in line to get your share. Keep your loans in good repair – do not bust covenants. Bankers will be less forgiving in this environment;
- Love your shareholders. It is much easier to get additional capital from people who know you than from people who do not know you;
- Love your employees, particularly your key employees. Although unemployment will increase, there will continue to be demand for key people and for people having skills that are in short supply. Your employees will feel insecure about the company and about their jobs. Keep them informed and involved in the process so that they do not make an uninformed decision to leave your company.
- Be relentlessly focused and realistic about your business and its prospects. You are now in survival mode and you need to be clear about what it takes to survive. Review your business strategy and value proposition to ensure they are in line with the needs of the current market environment;
- Cut costs, cut costs again, and cut costs for the third time;
- Watch your customers’ credit rating and payment history. Most will attempt to use you as a financing source and it is likely that several will fail.
- Review your payables policies. Take full advantage of the time your vendors will allow you to pay and pay just before you endanger critical relationships.
- Consider alternative sources of financing, such as asset-based lenders.
- Look for opportunities – crises breed extraordinary opportunities.
Source: Bill Patterson and Kit Webster, BridgePoint Consulting, Inc.
Hat Tip to Paul Wright for the link!
The Philadelphia Federal Reserve released its Second Quarter 2009 Survey of Professional Forecasters today, and the consensus forecasts for quarterly real GDP through 2010:Q2 are displayed below. The consensus forecast is for negative output growth to continue in the second quarter (-1.5%) of 2009 before turning positive in Q3 (.40%) and Q4 (1.7%), continuing into 2010 with growth of 2.2% and 2.9% in the first two quarters.
HT to Mark Perry for the graph.
Two forces that until recently turbo-charged US consumer spending—growing household debt and a falling savings rate—have gone into reverse. In late 2008, as households started reducing their indebtedness and saving more, consumption tumbled.
New research from the McKinsey Global Institute shows that the economic impact of further US consumer deleveraging will depend on income growth. Without it, each percentage point increase in the savings rate would reduce spending by more than $100 billion—a serious drag on any recovery. Relatively healthy income growth, on the other hand, would help households reduce their debt burden without trimming consumption as much.
The economy contracted at a 6.1% annual rate in the first quarter, which was a little more than the 4.6% decrease in real GDP expected by economists. The best news in the B.E.A. report report was the rebound in Personal Consumption Expenditures during the first quarter. Consumer spending grew at 2.2% during the first quarter (see graph above) following two quarters of negative growth (-4.3% in 2008:Q4 and -3.9% in 2008:Q3), and was just slightly below the 2.27% average growth since 2001.
REUTERS — There were some bright spots in the report. Consumer spending, which accounts for over two-thirds of U.S. economic activity, rose 2.2%, after collapsing in the second half of last year. Consumer spending was boosted by a 9.4% jump in purchases of durable goods, the first advance after four quarters of decline.
WSJ — GDP acts as a scoreboard for the economy by measuring all goods and services produced. Its biggest component is consumer spending, which accounts for about 70% of GDP. First-quarter spending increased 2.2%, after dropping 4.3% in the fourth quarter.
Hopefully, a good portion of this increase in consumer spending was in the lawn and garden category. As you probably saw in the Making Cents sales poll, 46% indicated that March sales were higher than same-month sales in 2008, 4% indicated they were the same level, and 50% indicated fewer March sales than last year. This is consistent with my conversations across the country as well.
Be sure to complete the April poll on the right side of the page.
THE ECONOMIST — The world has been suffering a bleak economic winter. Yet some say that they see early signs that the chill of recession is giving way to spring. For many commentators, a hunt for the green shoots of recovery is on. Search among a selection of British and American newspapers, for example, and mentions of “green shoots” in articles about the economy have increased enormously in the past couple of months. The earth was barren in the six months or so after the collapse of Lehman Brothers, but newspapers have, with the onset of northern hemisphere spring, started to find the confidence to discuss recovery. In the past, mentions of the word recession (as mapped in an “R-word” index) have been a useful indicator of the likelihood of the real thing. Could the same be true of a green-shoots index and the likelihood of economic recovery?
Likewise, the news reference volume for the terms “Great Depression” and “worst economy” have both dropped to almost zero recently, according to Google Trends: