Business Survival 101

Third time’s the charm!

By Bruce Larson

I don’t think anyone who has been in business for any appreciable length of time would argue with me when I say you learn much more about running a business in bad times than you do in good times. A business can be pretty easy to run when orders keep streaming in and profits continue to grow. Those are certainly fun times. But for many of us, complacency sets in. We get a little sloppy in the way we handle our business affairs. Some out there will claim this would never happen to them. OK, hats off to you, but if we are honest with ourselves, most of us would identify with this phenomenon. When our business starts to slow down and the profits flitter away, we start to get pretty nervous.

We are in a cyclical industry just like every other industry. Some cycles are regional, some national and some pretty isolated. But rest assured, you will sooner or later see a downturn in your business and you will need to be prepared to handle it. In my 35 years running my company, I have seen this happen three times. The first time was during the oil shortages in the late ’70s and early ’80s when interest rates were the highest we have ever seen. The second time was shortly after the UST upgrade program ended in 1998.

Both downturns happened very fast. We didn’t get a lot of time to see what was happening, and many difficult decisions had to be made quickly. Layoffs, cutbacks, bank loans and collections were only a handful of the adjustments that had to be made. But navigating through the troubled waters of the past has helped us know what needs to be done when times get tough again. Experience is certainly a great asset in these times, but it still requires tough and difficult decision making. One of the mistakes we make is taking too much time in recognizing that our monthly sales dip is just not a blip. Early recognition and understanding that our market may be weakening is of the utmost importance. It is far too easy to kid yourself into believing that everything will work out without any adjusting.

The third downturn I have experienced is actually happening as this article is being written. Most of you are aware of what Michigan has been going through the last several years. We have lost thousands of manufacturing jobs, we have the highest unemployment rate in the country, our real estate foreclosures are among the highest in the nation, and we are one of two states that is showing an annual decline in population due to people leaving to look for employment. Manufacturers are leaving our state in droves, and our state government is facing continual budget deficits each year. In response to the decline in our tax revenue, our legislature has raised taxes to compensate. The Legislature refers to this as a “tax shift” and not an increase. I had a hard time understanding how this “shift” would affect me until I consulted our accounting firm. There I learned that this “tax shift” would cost my company about 40 percent more in state tax than in previous years prior to the “shift.” Thank goodness this was only a tax shift—I could not have afforded an increase!

Michigan is being cited by the likes of The Wall Street Journal, Rush Limbaugh and Sean Hannity an as example of how bad an economy can get screwed up by a government that looks for a short term fix. Basically they are saying that the political leaders of Michigan are doing exactly what the federal government should not do if they want to soften the impact of what may, indeed, happen on a national level.

So here I go again, entering another “learning experience” for the third time. Many difficult and painful decisions will be made as they have in the past. That is just the way it is and having to make these adjustments is just part of the price you pay to run your business. In a twisted way, I guess I feel fortunate that I have been allowed the opportunity to go through this exercise again. Otherwise this article would be written by someone else who did a better job than I in doing what had to be done.

Most of you have gone through this process at least once and survived. Those of you who have not had this opportunity, be assured you will at some point in time enter your own learning phase, and you may want to take a look at the Business Survival chart above. A man much smarter than me gave me this list. You might find it useful.

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The PEI Journal • Second Quarter 2008 • Volume 2, No. 2 • Contents are Copyright © Data Key Communications, Inc.
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