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Maintaining Growth Requires Focus on Execution

For many, it has been the working assumption that we are near the bottom of the economic cycle and that growth will soon return, restoring some degree of normalcy. As projections for 2010 take form, the momentum within the economy seems ordinary at best. While the Dow Jones Industrial Average has enjoyed a pleasant spike of late, it has been cost cutting and not growth that has been the impetus. Of greater concern is the ominous price our economy will pay for the stimulus package and health care reform; years of tax increases for the wealthiest of Americans, crowding of investment and higher interest rates (as the government sells bonds to fund the debt). The concept of a business cycle is really something of a misnomer as any company’s cycle is a convergence of the economic cycle, regulatory cycle, monetary cycle, and multitude of things that propel movement along an organization’s natural S curve. Normalcy may be a concept of another era, swept away by the volatility of large swings in the economy, augmented by natural disasters, regional military skirmishes and unstable energy and raw materials costs. How do companies plan in an environment of strategic uncertainty? First, entrepreneurs need to face the realities of a new world and the implications for long term growth: This is not fear mongering; only a presentation of facts already in evidence. Companies who wish to sustain historical growth rates will have to alter their way of doing business and focus more intently on execution: Be bold: The time for cost cutting and incremental improvement is over. As competitors are weakened, there are more opportunities for the companies who are able to focus and disrupt the marketplace. Let technology be your friend: Look to move entire businesses and service models to the Internet as customers are more accepting of portals and prefer simple, self service solutions that save them time. Focus on emerging markets: If your business is global, take advantage of markets such as China (projected 2010 growth of 9%), India (7%) and Brazil (4%). Remain focused on cash flow: For most entrepreneurs, emphasis will need to continue to be on cash flow and not revenue growth. It is critical to get a projected Statement of Cash Flows on a monthly basis and form decisions based on solid cash projections. Embrace government (I don’t say this lightly): Government is one of the only sectors that is consistently growing, and cannot be ignored. The table is set for a wave of federal regulation, especially in the financial sector. Expect a higher health care burden: Begin planning now (perhaps setting up a reserve) to fund health care for all employees. The new reality of paying for employees from the date of hire may require that companies reorganize or reframe the employment offer. Beware of the threat of higher energy costs: As oil is an import, and the dollar is likely to be devalued (as a result of deficit spending) its punch will diminish as other currencies recover. The cost structure associated with $3.25 gasoline is dramatically different than it is at $2.50 a gallon. Challenge assumptions on revenue projections: Do not blindly accept sales forecasts without any substantive data. Unless revenue can be substantiated, forecast sales that support modest growth. Continue to look for bargain basement acquisitions: Only pay for assets and customer lists (it doesn’t make much sense to pay goodwill in most situations). Acquisitions completed in downturns average double the return of those that occur when the economy is growing. Continue to plan: Planning is critical and urgent. Companies who are more diligent about planning are the first to react to changes in market forces and are outpacing the competition. Amazon’s senior managers spend 3 hours per week on strategic planning, continuing to move the envelope with innovations such as the Kindle and expansion into apparel. Marc Emmer is President of Optimize Inc. (www.optimizeinc.net). Marc is an accomplished author, speaker and consultant and is sought after by CEOs as an expert on strategy, profit improvement and client satisfaction. He can be reached at 661-310-2212 or at marc@optimizeinc.net

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