ARE WE GOING TO SURVIVE THE RIDE? - WILLIAM EASTMAN

PROFIT RADIO - A NETWORK OF ENTREPRENEURS FOR ENTREPRENEURS

Introduction
Well yesterday the election was finalized barring last minute legal action that is improbable. The United States has a new Administration and as I said yesterday's blog post "POLITICS, ELECTIONS, AND ECONOMICS", personnel is policy. Given the announcement of who is being considered for important economic positions, we can extrapolate that policy is an extension of the Obama Administration and what a Clinton Presidency would have brought. Just like a second Trump Administration this has significant ramifications for not just the US economy but for the world.

It is our considered opinion that sometime between the end of 2020 and the 2nd Quarter of 2021 the United States will be experiencing a recession that will also effect a stagnate world economy. Today' show will review the steps WE ARE TAKING to ensure we exit the recession in better shape than we entered it.

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Objectives - The WHY
This conversation pains me but was coming. We are in the 11th year of an expansion and that puts it at the long side; the average time between between the crest of economic waves is 8 to 12 years.

The remainder of the show will focus on the actions you need to take to make your business 'antifragile'.

Key Issues - Owner Perspective:

1. What is an 'antifragile' business?
2. How do I come out of the upcoming recession stronger? 

What You Need to Know - The WHAT​
Antifragile: “Some things benefit from shocks; they thrive and grow when exposed to volatility, randomness, disorder, and stressors and love adventure, risk, and uncertainty. Yet, in spite of the ubiquity of the phenomenon, there is no word for the exact opposite of fragile. Let us call it antifragile. Antifragility is beyond resilience or robustness. The resilient resists shocks and stays the same; the antifragile gets better.” Nassem Talib

• Fragile organisms and organizations break under stress. It is the species one step from extinction or an organization one mistake from failure. The majority of businesses find themselves in this condition. The final event in their demise can be self-induced like running out working capital during a growth spurt, or driven by external events like the pandemic shutdown.
• Robust organisms and organizations resist shocks and remain the same under stress. They have sufficient redundancy to withstand the effects of an internal error or an external black swan event. These organisms and organizations are immunized from shocks that black swan events generate.
• Antifragile organisms and organizations get better under stress. Taleb coined this phrase because there was nothing in the literature that describes this condition. These organisms and organizations prosper during periods of great stress because their response is to build or take advantage of extra capacity; they get better under stress.

There are apparent and not so obvious implications of this model. For example, our drive to make everything lean or optimized by the reduction of redundancies tends to blow up under stress. Take JIT inventory for example. What happens when the supply chain breaks down and the only inventory you have in reserve is on the shelves and not in a back room? Exactly where several retailers found themselves a few weeks into the pandemic.

What You Need to Do​​ - The HOW

1. Make Managing Cash Flow #1 Priority before the Crest
   1. Analyze all spend decisions from the expansion and eliminate the nonessentials
   2. Focus on minimizing fixed costs
   3. Get a Line of Credit and don't use it or get it down to zero
   4. Get clean with Accounts Payable and renegotiate terms
   5. Bring all Accounts Receivable under 30 days or offer terms to close out delinquent accounts
2. Make Managing Cash Flow #1 Priority after the Crest
   1. Review accounts with customers to improve the relationship
   2. ​Lean up the operation - reduce variable costs, reduce your cycle times to design>build>deliver
   3. Pass on cost savings to customers 
3. ​When the recession becomes obvious - Sliding Down the Wave
   1. ​Rethink the business by focusing on core competence - if you started today (you might be) what business would you get into?
      1. ​What you do, and/or
      2. How you do it
   2. What disorder in the environment can can you take advantage of? Where are the future monopolies?
      1. ​​​Increase your options - place more small bets with high returns if successful
   3. Agilean - build only on demand and use agile principles tom design>develop>build>test>release

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We are your single, one stop source for business success, period, end of story.

1. ​Listen to the Economics for Owners Series 
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3. Show Up Next week

Make sure you leave some thoughts in the comment section below. I am interested in continuing the conversation.

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