Plan Business Investments Around Slow Economies

Dollars planted in dirt image

In business and in life knowing when to pivot is vital to success and the future of your organization.  As much as we try to read the signs and try and predict the future, business owners typically see a positive future ahead regardless of when asked.  Maybe there is some new products you are rolling out, perhaps you have some exciting opportunities in the pipeline, or perhaps things feel really good right now.  Some or all of these may be true, but that doesn’t necessarily translate to a bright future.

It’s the Economy Stupid

Many, many, many mistakes are made in roaring economies.  As I write this, the USA economy is as strong as we have seen in years.  Businesses are growing, investments are occurring in all facets of businesses and society, and people are getting hired.  Unemployment is at record lows and taxes are reduced significantly over previous years.  There are really great signs ahead and it is in times like this that mistakes are made.

Mistakes can come in all forms.  Most often, and I have been guilty of this many times, is in terms of business spending.  When things are roaring we business owners feel empowered to spend money and make investments in the business.  And this is precisely the wrong time to make these investments.  We should be stockpiling money away to prepare for the inevitable downturn in the economy.  Investments should be made during down cycles when there are more deals to be had.

During down economies, it is the companies with the money, the cash on hand, that can afford to hire employees and make the investments.  

Think off it like this.  A house during a hot economy costs $500,000 in Charlotte, NC.  That same house 6 years ago could be bought for $350,000.  Why on earth would you pay $500,000 for the same house?  The land didn’t get bigger, the house didn’t have more features, and the schools didn’t change.  The only thing that changed were the market forces.  And you can’t control those. This is where patience pays off big time.

The same thing is true in business. The networking upgrade you want to purchase, the employee you want to hire, and the building you want to build will all cost more today than it will when the economy slows.  So slow down and figure out how you can maintain the current success without taking on more bills that could put you under later.

If you can control your spending now, you will guarantee a longer runway when the future slow economy hits.  Unless you fail to pivot.


Knowing When to Pivot

If you can step away from your market and look at it from the outside, you will notice several telltale signs that can be an indicator of the market shifts occurring.  These signs need to not be ignored.  Sometimes the markets can be shifting in your favor, others it can be moving away from you.  Never mistake current sales for the trends, you have to look at the growth rate.  The growth rate should be an indicator of growth outside of any price increases or external forces. How many customers have you added?  What is your average sale?  What is your rate of utilization by employees?

When these indicators take a downturn, that is time to pivot.  The severity of the pivot will vary based on the particular changes, but nevertheless the pivot will be necessary.  You have to decide if a product or service change is necessary and to what level.

You are in charge.  You got your business to a certain point.  You can successfully navigate economies both good and bad if you are patient and diligent.  If you save money now and spend later, you will survive your competitors failure and live to see a brighter future.