Never Waste an Economic Downturn

I honestly don’t know who said it first, so, we’ll just say it was me: “Never waste an economic downturn.”

I think it’s brilliant. I listen to the traditional business people discussing the traditional business responses to the economic downturn – Lots of blah, blah, blah – but let’s face it: it’s just old-white-guy-lip-flapping. Here are some examples…

“Companies need to ride out the economic downturn…”
“Only the big, stable companies will survive this recession…”
“There will be a shake-out which will leave a very few winners…”

Where do these people get their data? The strong, scrappy companies know that it is harvest time for the sharp and courageous. You do not bury your head in the sand during a fantastic period like this one. Here’s what I am talking about:

Headhunt – There’s so much great talent available right now. Larger companies, following traditional thinking and quarterly driven expectations, have cleaved off many talented people REGARDLESS of talent or performance. You pick up your best people during times like these, because frankly they would not be available during more stable conditions. Go hire, right now, this is the time of opportunity.

Moneyhunt – Wow, money is tight; I’m not going to blow smoke on this issue. However, I’ve been in 15 cities in the last 90 days and there is money out there. But, you will need new banking relationships to get it. The banks with money are using this time to gain marketshare- so they’re poaching through lending. Don’t even bother with the usual suspects – they’re still digging out of the last cycle of bad decisions.

Build Capacity – You cannot invest in your business at a better time than right now. Equipment, land, technologies, buildings – they’re all at fire sales prices. Back to the money – you’re going to have to clean up your Balance Sheet and get your story- all that there is to know about you and your industry – together and cleaned up. Having said that, this is the time to re-position your company and to own the next business cycle against your competitors. Do what your competitors are doing and you’ill be in the same position at the end of this cycle as you were when you started. You have to go against the tide in this cycle to own the next one.

I read Berkshire Hathaway’s Chairman’s Letter every year, written by Warren Buffett. He has complained for TEN YEARS that the market was too strong to invest in. Read that one again slowly. What are he and his portfolio CEOs do right now? They’re headhunting, building capacity, and making strategic acquisitions – because opportunity is found in the downturn. Don’t waste it.