TOMORROW AND TOMORROW AND TOMORROW
Some predictions for 2009, based on my research, follow:
Business Numbers That Truly Matter: The folks at the historically accurate Kiplinger Letter predict 0 percent GDP “growth” here at home with worldwide GDP growth pegged at 2 percent; unemployment will top out at a whopping 8 percent with more than 2 million jobs lost; prime will be at 3.5 percent by early ‘09 and nothing resembling normal for housing will develop before 2011. The weak economy will make it tough for businesses to raise prices while elevated unemployment will hold wages in check. Our recession and slow recovery will shrink the trade deficit for the third consecutive year—many of our biggest trading partners face deeper and longer recessions than we are likely to experience.
Employee Numbers That Truly Matter: Pay raises for ’09 will average 3.6 percent, year-end bonuses will be smaller but few firms will dispense with them and workers will continue to be asked, once again, to pay more for health care.
Consumer Numbers That Truly Matter: Gasoline prices for ‘09 will average $2.25 a gallon with crude oil averaging $80 a barrel. Credit card debt will top $1 trillion in 2009 even though retail sales growth will struggle to stay positive. The 30-year fixed mortgage rate will stay between 6 and 6.25 percent for most of the year. With oil prices dropping, inflation will show an increase of 4.5 percent this year and about half that in ‘09 with the impactful exception of food prices positioned to move up 6 percent.
THE LAST WORDS UNTIL NEXT YEAr
Generally, 2008 wasn’t the best year for small business owners — in fact it was a struggle. Let’s not despair. History shows us two critically important truths: downturns don’t last forever and it’s when people are most disheartened that rebounds begin! These are messages you must enthusiastically preach to your organization. However, we can’t just communicate our way out of this conundrum. This global recession is being fueled by a massive credit freeze. Prudent and protective actions should be taken immediately.
I was taught by my late father, John Traynor, to recognize bankruptcy as more of a payables than a revenue issue. I can still hear him say, “A business doesn’t go bankrupt because it can’t make a profit. It goes bankrupt because it can’t pay its bills.” What follows is obvious business advice that still gets forgotten or dismissed as “irrelevant” by many supposedly bullet-proof firms — 28,322 of them filed for bankruptcy in fiscal 2007 (43 percent more than the year before!) Perhaps this advice isn’t that obvious after all?
Plan for the worst, hope for the best and when it comes to an emergency cash injection always have Plans B and C at the ready.
Trim any fat you can find. Cut back where you can and renegotiate the most favorable payment terms with everyone from your biggest vendor to the paper boy. Obviously, take a hard but careful look at labor costs and, if possible, institute a pay for performance system before you hack at manpower.
Hold on to every penny like it’s your last; fine tune the timing of payables and take advantage of the maximum allowable time to pay your vendors. If possible, extend less credit to certain customer classifications.
Optimize cash flow by providing extra-hefty incentives for customers to make early payments. If you’ve got stale money on the street and you need it now, consider discounting any overdue balances — even on just a one-time basis. Invoice promptly.
Monitor your financial health constantly and know your numbers cold. When business was its strongest, you’ve been able to literally work your way out of debt. You may not have that option in 2009 so watch your cash flow and total debt load every day.
Make certain you have the right bank — find a high quality, hungry banker. Network with other local businesses to find the bank with the best service and best policies toward an organization your size.
As 2008 comes to a close and you begin envisioning the near future, you might see yourself as David, armed with just a sling and stones. You can guess next year’s avatar — the mighty Goliath, the giant Philistine warrior who, against great odds, was downed by one well-placed stone, guided by faith and positive expectation. The David and Goliath metaphor is as corny as they come, but it’s the message that matters. When you’re equipped with the right tools, plan and attitude, there is no such thing as being too small to defeat a problem or create an opportunity. My last words of 2008 are really meant for 2009. They are borrowed and anonymous but somehow right for those seeking inoculation against the woeful forecast and reassurance of your individual potential: If you think you’re too small to be effective, you’ve never been in the dark with a mosquito. Here’s to a New Year that each of us will embrace with hope, enthusiasm and deadly aim with our slings.
About the author: Chris Traynor, SPHR, senior business columnist and director of Whip-Smart Management Consulting, can be reached at firstname.lastname@example.org.