Business Survival Strategies for a Changing Economy
Providing my clients with sound financial advice and superior customized service has been the basis of my work for the past 38 years. This experience has provided individuals and business owners, like you, greater incomes, reduced income taxes, greater cash flows, innovative ideas and peace of mind.
I am writing this because I am very concerned about our economy and how it will affect us all. It is not business as usual, but something entirely new that will affect how all of us live and do business.
Despite the obvious benefits of the unprecedented U.S. and global economic boom, which began in the early 1980's, economic, social and political issues have been building for decades. Some of them are as follows:
- There is a growing inequality in income and assets.
- Over the past few decades, health care inflation has exceeded the general rise in prices by about 2.5 percent a year. These rising costs are bankrupting the nation, businesses and squeezing middle-class salaries.
- A substantial portion of society has inadequate health care.
- Education costs have exceeded the general rise in prices in an age where information for all practical purposes is free.
- Extreme debt levels for government, businesses, and consumers.
- Failing pensions and unsustainable benefit programs.
- Pollution and global warming that is now at an unprecedented level.
Now, let us look at the economy. It is now clear that the recession will not be over anytime soon and will not be over before the end of the year. Some experts predict that the recession will last several years and that job losses are going to continue. Unemployment will continue to be high. The consumer is not spending and most of our economy is consumer driven.
Home prices are down from their peak by about 35 percent. Some experts say they are going to fall by at least 40 percent from their peak, and could be 45 percent, before they bottom out. That fall of at least 40 to 45 percent of home prices from their peak is going to imply that about half of all households that have a mortgage are going to be underwater with negative equity in their homes.
Massive deflationary pressures in the economy will be the dominant theme this year and next year. Deflation for a business owner is one of the hardest problems to deal with, and many will just close their doors. The large budget deficits and their monetization are going to lead to an increase in expected inflation that may lead to a further increase in ten-year treasuries and other long-term government bond yields, and thus mortgage and private-market rates. Taxes will rise from their historic lows to fund budget deficits.
So it is time for a change and that is a good thing, though at times it may seem uncomfortable. Historically, recessions have been a time when new companies get born and good companies separate themselves from their competition. Crisis is really an opportunity for those who are aware. Necessity breeds invention. So here is my list of what individuals and businesses should be doing during this period of unprecedented change.
- Start with yourself
. What are you doing to grow in consciousness? Consciousness is alertness or presence, the willingness to observe without attachment. You are aware that you are aware. It has been said that you cannot solve the problem at the level of the problem. When you grow in consciousness you rise above your problem and the solution makes itself known to you. You have increased mental power. When consciousness guides our mental faculties, the results can be both brilliant and incredible. So here is my list of ways to grow in consciousness.
- Start a meditation practice. If you do not know how, call me and I can give you suggestions. The benefits are better health, peace of mind, more creative ideas, better relationships, increased mental capacities, freedom from addictions and more if this is not enough already.
- Find the type of exercise that is right for you and practice. Practice in and of itself is transformative. This could be weight-lifting, yoga, walking, running or tai chi to name a few.
- Change your diet. All the studies show that artificial coloring, preservatives, insecticides and artificial sweetener (just to mention a few), make the body and mind go weak. Conversely, pure, local, in season and if possible organic foods, made by human hands tend to make our bodies and mind strong.
- I believe that the individual who uses this economic crisis to make themselves smarter and more innovative through study, is the one who will grow in consciousness and will not just survive, but thrive down the road. Invention is the way back to prosperity. Read a book like "Think and Grow Rich" by Napoleon Hill or join a book club. Try reading a different magazine each month. You will be surprised how this opens your mind and expands your awareness.
- Have a definite purpose and a clear vision for your life and/or your company. Every person who has done remarkable things in their lives has had a clear vision, stemming from a deep and pervasive sense of purpose. It seems a creative power is released when an individual�??�?�¢??s vision and personal purpose are aligned. Results are easier to create, the vision gets clearer, there is more commitment to the vision and life seems to all fall into place.
- Get your financial affairs in order. File your taxes on time. Create a financial plan, which includes estate planning, retirement planning, college planning and investment planning. Reduce spending, save money or pay down debt.
- Get involved through service to your favorite church or charity or in the community.
- This next list is for your business
.
- In your business, you should be making more money and spending more time with your family than if you did any other kind of work. If you are not, then either fix your business or sell it and get another job.
- Make sure you have meaningful, accurate and timely financial information on which to base decisions. Know the profitablity of every customer.
- File and pay your taxes on time.
- Invent, Invent, Invent! Look for ways to radically redesign your production and organizational system. If you always do what you have always done, you will always get what you have always gotten. Make sure that your product and services will be needed 5 years from now. Make sure your products and services have the most favorable demographic trends.
- Make sure your business operates from the bottom up and not the top down. People innovate more horizontally than vertically. Provide your people with the technology, the tools and the knowledge to make decisions and to customize products and services from the organization�??�?�¢??s broad range of products and services and strategic alliances. Management is the cause of most business problems and not the solution.
- There is a tremendous opportunity and cost savings in technologies and designs that conserve energy and natural resources and greatly lower pollution.
- Make sure you really need your capital expenditure. Put off spending money on capital expenditures and loans until the worst of the downturn is over. Then assets and real estate will be much cheaper and interest rates lower.
- Cut all unnecessary costs now before the economy forces you to later.
- When structuring leases, be aware that they could be significantly cheaper 2 to 3 years from now and long-term leases should be signed only when the decline in asset values has reached a bottom.
- Pay off high-interest loans and refinance at lower rates.
- Reduce inventories and reduce or eliminate accounts receivables.
If there is anything I can do to help you or your business during these economic times, please let me know. I am sure I can make a difference. Call me at 608-637-6898 or e-mail me at
marty@martymcevoy.com. Be well.
Warmest regards,
Martin B. McEvoy, CPA, CFP
