I was having lunch last week with a workout officer at a large bank. He was commenting on how customers referred to his department were often in a state of denial. Not unlike the man who finds himself in Hell but won’t accept it!
It seems that a lot of businesses are in denial. Their sales are off on average thirty percent, they have been collecting old receivables and are losing money. Furthermore, they know they are going to have a problem with their debt compliance certificate in the coming quarter. Yet, they wait for something to change.
It is important for all of us to accept that this recession will last longer that those in the past. It already is one of the longest!
One of the perplexities of finance is that a company often has more cash when it is shrinking and going out of business than when it is growing. Consequently, a number of companies are generating cash and losing money at the same time. In a way they are consuming their flesh! At some point they will have run through their liquidity and have fewer options to save their company.
What every company should be doing is developing a business plan to reposition themselves to first stabilize the profitability at a lower level of sales and, more importantly, take advantage of the changes taking place. It all starts with making a business plan and putting it in writing.