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The New Old Normal

The main benefit of growing up in the family business are the instincts developed over thirty plus years. Back in the late 70s and 80s the boom and bust business cycles happened over a 4 to 5 year span. The boom times of the 90s were an aberration.

Even the economic events of the early 2000 period seemed linked to terrorism and other global political events and not a systemic failure of the financial sector. After the cataclysm of the 2008 economic meltdown people seem to think that the economy will someday get back to that of the 90s. We need to all get used to the fact that the 90s were not normal. What is happening right now is normal. Some have taken to calling it the new normal. It’s not new, it is the same boom and bust cycle that was the economy prior to the 90s.

The way forward in the new old normal is with profitability and cash. Retained earnings is what my Dad called it. More than ever the numbers on your financial statements should direct everything a company does. In order to weather this volatile economy companies have to become profit leaders in their industry. Financial strength is the best position to have in a down time and in your industries maturity phase. And we can count on down times every 4 or 5 years.

The companies that were deep into their lines of credit did not survive the last four years. Many companies have had to tap LOC in order to survive and now cannot get ahead again. The goal for all companies in the new normal is profitability and building cash reserves via retained earnings. Set your annual goal to become one of the profit leaders in your industry and make a list of the changes required to hit that goal. Then start making the changes on your list.

Not sure what changes to make? Then go get a valuation of your company, talk to other companies who would be interested in buying you. Choose suitors out of your immediate market. Be upfront about your intentions, that you want to make your company a good fit for the day when you want to sell. Find a buyer who you like? Share your financials and start making the list of changes they require to improve your viability and your value. Be ready for sobering revelations about your company, but swallow your pride and make the changes. In volatile times cash is king.

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