Real Time Customer Data

I was heartened to see that our Business Pulse participants are feeling more optimistic about 2010.  Sentiment about the future is a very important determinant of the future.  We do see the monthly financial statements of hundreds of businesses in the area.  There is no apparent upward trend.  What I see is about 15% of businesses continuing to do well.  75% are doing a great job at treading water with 25% less volume.  Like consumers, they are learning to do more with less and have lowered their expectations.  They aren’t very interested in borrowing and spending.  They understand that leverage has its purposes, but it is not a substitute for strategy.  10% are really struggling and the longer the recession lasts, the lower their odds of survival.  I really long to see the green shoots of spring.  The fact that they are not visible does not prove that they are not there, but I can tell you that they are not visible.

 

It is hard to take a look at a specific industry and proclaim it to be the winner in our community.  We have people in manufacturing who are in the upper 15% of companies, and a few in the bottom 10%.  The food supply industry seems to be holding out well, but the food service industry is not.  Everyone knows the problems with real estate, both residential and commercial, yet we have suppliers to those industries in the upper 15%. 

 

What is easier to see is the common characteristics of those in the upper 15%.  It all starts with leadership.  The people in this group didn’t get here by being lucky.  They saw what was coming and they took the necessary steps to get there quickly.  In short, they had a strategy, and the strategy wasn’t, “Let’s duck our heads and see how long this lasts.”  These leaders took the measures to strengthen their balance sheet when the trouble first started.  They have kept their debt-to-worth ratio at 2:1 or lower.  They have cash and delevered as best they could.  Next, this group went to work on the income statement side with aggressive, strong expense control.  They managed margins and were able to take business strategically because of this.  I have yet to see many in the upper 15% expanding their labor force.  I fear that employment and job creation will be the last step in the exit from the current recession.

 

For 2010, the upper 15% are expecting the best, but are busy planning for the worst.  The 75% group will be busy taking the steps that the upper 15% took a while back; strengthening the balance sheet, aggressively managing expenses and managing margins.  The lower 10% will be in ER-triage mode.

 

Next time, the final point of our planning session; the fiscal train wreck.

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