Business Value During & After the Recession
Let's begin with the facts. The economy is in recession, already the longest such contraction since the great depression. The stock market is down, way down. We are approaching double digit unemployment not seen since the early 1980s. Investor expectations and risk perceptions have dashed the valuations of the publicly traded companies which serve as primary benchmarks in the valuation of closely held companies. Your 401-k is likely now a 201-k. Sales, as well as earnings, at your company are likely down, and, yes, the value of your company is likely down.
We have had the unenviable task of delivering the news of down valuations to many clients in this harsh business cycle. In some cases, value was down even when our clients had actually increased sales and earnings. The worlds of business and value have been less than optimal since the onset of the current recession. For our many financial institution clients, the current downturn is more of the same trend that started with the sub-prime mortgage crisis more than two years ago.
Some clients and many appraisers are experiencing their first recession. Those of us more seasoned, if you will, have experienced other recessions and we remember the pain. Living through a recession is a trying thing, and often takes the fun out of business. We have all witnessed examples of business owners, managers, and employees becoming demoralized or even paralyzed by the fear of an unknown future. This tendency to focus inward out of fear and to adopt a pack mentality (everyone else is doing it or not doing it) is what many term "recessionary thinking."
How do we respond to recessionary thinking? An antidote is "recessionary action." As consultant Dr. Jim Harris, author of Corporate Excellence: How to Maximize Long-Term Productivity and Profits, says, "Fast and good is better than slow and perfect." We should all be taking action and working on our businesses.
Specifically, we should be focused on key aspects of our businesses such as sales, cash flow, customer service, systems, and capital spending.