What would a football game look like if each team just played offense? Not very practical is it? Unfortunately, that is how most entreprenuerers manage their business.
They often focus on increasing sales, new growth initiatives or physical plant expansion. But what happens when the game turns and the economy slows down? As the fallout from the subprime market works its way through the economy perhaps it is time to rethink your strategy.
Right now the economy could go either way; into a recession or bypass one altogether! Now is the time to shift your posture from an aggressive one to a defensive or , at the least, a neutral one.
So what actions might one take in a defensive or neutral position?
– slow down on hiring new employees (not stop, just slow down)
– pay down debt
– build up cash or liquidity
– complete existing projects
– postpone new projects (and fund out of cash flow)
– increase marketing efforts (often marketing gets cut in a recession. You should do the opposite!)
To paraphrase a quote of Warren Buffet: You never know who is swimming naked until the tide goes out!
Let’s say that you take defensive actions and the economy slows down? Your company would then be in an excellent position to resume its growth afterwards. If we do go into a recession then you are in an excellent position to weather the storm and gain market share from your competitors. Playing a defensive game is an important strategy in growing a company.
Hiring the right accountant When I meet a business owner operating at a successful $10 million in revenue, they often mention, “My CPA”… I immediately know that CEO/Entrepreneur is referring to their Tax CPA. That is because one thing that all Entrepreneurs have in common is that they must file a tax return. So, from