Weathering Economic Uncertainty

Don’t become a casualty of the economy. Roy Sieben, Partner at SB Partners LLP, offers insights into surviving the storm.

Read the headlines lately? You don’t have to be Chicken Little to believe the sky is falling. It’s hard to be optimistic when headlines are rife with reports about our plummeting economy. From Bay Street to Main Street, everyone is concerned about unstable oil prices, rising interest rates, the devastating credit crunch, and shaken consumer confidence.

Canadians may feel insulated against the worst of the American crisis, but there are tough times ahead. Ours is a global economy, and one crisis can affect everyone. Even if we come through this current tempest unscathed, our markets will never be the same.

It can be easy to succumb to panic and get out while the getting’s good. But economic uncertainty is the environment we are all in. There is a huge advantage to those who play their cards right.

In the words of the ancient Greeks, know thyself. Now is the time to assess your competitive position and revisit your business strategy. Here are four key perspectives to consider.

First, assess the political factors. Examine the government’s attitude towards business in general, and your industry specifically. What about your customer’s political environment? Is there a threat of protectionism? Will your industry be affected favourably by tax cuts, or are challenges coming your way? Anticipate more regulations.

Second, assess economic issues. Monitor economic growth stats and employment rates. How will you be touched by interest rates and inflation? Understand what’s happening to your customers and suppliers—some may disappear before your eyes. Watch your inventories and receivables. When times are good, controls can become lax. Are you monitoring credit granting and reviewing policies? Can you assess profitability by product line? Are sources of supply in jeopardy?

Third, assess societal issues. Thanks to environmental awareness, companies are judged by how green they are. Issues such as changing demographics and cultural diversity also come in to play. How will an aging population affect your workforce, your markets? Understand your customers’ values and position yourself favourably.

Finally, assess technological considerations. An economic downturn is the time to evaluate product life cycles and product development efforts. Would a further investment in technology reduce costs or improve efficiencies?

During an economic downturn, don’t panic and assume the end is nigh. Watch for clouds on the horizon, and be prepared. Knowing where you will be hit the worst can help you through whatever storms come your way.

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