Start of the 'not so great' Depression

By Jason de Luca

Yes, you read the headline correctly. All the data is out there, so there’s no point in re-analyzing what will be the biggest kick in the face ever for business people in this country and maybe for the globe.

At my first kickboxing bout in my teens, I asked my trainer why so many people showed up for amateur ranked competition. He said to me in his gravelly voice: “de Luca, how many times can you show up to a place with booze and snacks, get to see eight fights and not be personally involved in any of them?”

Well, my friends, we don’t have the luxury to sit back and watch anymore; we are all going to be in this one, no matter where we are sitting. The aim of this commentary is to give business owners, in the small to mid-sized range, some practical advice in advance of the street fight we are all about to be dragged into.

1. The president of the company should create a crisis-leadership team (call it what you like) made up of a few employees from different job types, not only from sales. Print on big paper a roadmap of changes & goals, starting with highest priority first, for everyone to see and work by. TOO MANY CHANGES ARE CONFUSING, and just sending out email-based changes that read like: “Blah blah blah, work harder, make more money, blah blah” get filed away safely in the trash-bin.

Keep changes simple, few in number and follow up on them checking off when milestones are hit.

2. Change starts from the top and sacrifice begins at the CEO’s desk first. Lower your own salary to invest it in operational costs in 2009/10.

3. Start diversifying revenue streams or limit risk exposure by getting more clients even if that means smaller projects/fees.

Sound like giving up? No, it’s called survival. I would rather my clients have slightly lower margins on two times the revenue from a more diverse client base, than “sticking to their guns” and dying in the sand cowboy style, when premium rate paying clients go belly up one Sunday afternoon.

4. Make a worst case cash scenario for no new sales for the next three months and a tiered plan for no new sales for the next six months. Can you even make it six months or without any new cash? Have you even run a sample model to see what would happen?

5. Get a loan from the government for small to mid-sized businesses, even if you don’t need it. They have an office for it and are very helpful. (We got approved and it was surprisingly easy.)

6. Create client incentives for payments up front, early confirmations and for long term commitments. Some large companies have policies to pay upfront if discounts are offered, ask, don’t be afraid.

7. Analyze your sales team’s results from last year, before the crash in September. If a sales person was way under targets even when times were “good,” then understand now that they are not going to sell better this year when things get much, much worse. Retrain them or use them elsewhere in the organization.

8. Incentivize your sales team for new business streams like never before. To save on operational cash, we offer extra paid vacation days, half days off etc.

9. Adopt some “Circle the wagons” strategies like sharing infrastructure costs and bartering goods/services with partner firms. Can you give up the office all together and have everyone work from home and VPN into a hub? Speak with your crisis leadership team and come up with various “what if” ideas, because you never know when you may need to roll a few out.

10. Turn off all CNN, BBC News and other media during office hours. Play rock-n-roll, jazz, punk, whatever. Just no more bad news that you can’t do anything about!

The time is over to “wait it out and see what happens,” because it’s happening now and you better be doing things differently today to get ready for it.

The writer is managing director of Smart Partners KK, a company that offers sales training, consulting, business strategy and financial planning advice.

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Latest 15 of 31 Total Comments Show All

8iamhappy8 at 11:59 AM JST - 31st January

If you think 2008 was bad... In 2008, the Dow Jones Industrial Average went from 14,200 points to 7,450 points (lowest), which is a 50% drop. Let's assume that this "recession" is similar to the 2000-2003 recession that saw the NASDAQ drop by as much as 75%, it would mean ANOTHER 50% drop in the stock market to around 3,700 points (75% from the peak) either this year, or the next. So, if you thought the 2008 slide was bad, we're gonna have another one just as bad this year, percentage-wise.
hakujinsensei at 06:08 PM JST - 31st January

solarbuster; of course I was being facetious. the issue is not the borrowing mentality. human nature, just like goldfish, always eats too much of a good thing until it destroys itself. we are in this mess because Nixon quietly erased the gold standard in '71 and the fed has been creating currency out of thin air ever since and the normal cycles orchestrated to provide those at the top of the food chain profit have increased dramatically in amplitude. there is a boogy-man and he is our apathy and refusal to understand the socio economic matrix that governs our modern lives. which brings me to,

elephantman... are you not actually Milton Friedman incognito? what kind of mental masturbation is that?

The reason why companies go bankrupt is because they run out of cash. as opposed to not being able to repay debt....

my actual point was that de luca et al. missed the point completely. of course I understand that he is using this medium to advertise his enterprise but society is not a zero-sum game. we should be rising above ourselves and think beyond survival. our goal should not be survival but prosperity. and prosperity is something far deeper and more intrinsic than cash in the bank. those at the shallowest level that succeed and prosper during this economic downturn will do so based on relationships. those that prosper will do so because of relationships. how much grander it would be if we enlarged our circles to include those that fall in the process whether it be by greed, ineptitude, or inability.

even Al Capone realized this when he chided his contemporaries to invest in charity lest the capitalist society that served his dream so well fall as did Rome.

for what it is worth, I have seen this before. I sold real estate in Oregon in 1982 when FHA loans were 18 percent. those of us that survived called more, asked more for sales and slept less. those of us that prospered called more, asked more for sales, slept less and gave more ; )
solarbuster at 06:19 PM JST - 31st January

Elephantman your right they run out of cash first but they go bankrupt when they can't repay creditors, running out of cash does not always lead to bankruptcy other options are some times available. Rewording the time line is a sales strategy used by people selling loans suggesting if people take out loans it stops them running out of cash.
apecNetworks at 06:41 PM JST - 31st January

I have a regional perspective, rather than any grand perspective in Japanese business climates, but SmartPartner's move on securing credit NOW seems really sharp - to get a line of credit before anyone needs it is a good move. It may come down to survival of the smartest and the most likeable (solid connections). Things are not good, so JT readers should make a solid strategical/tactical gameplan for the near future. May all have luck on their side.
8iamhappy8 at 04:58 AM JST - 1st February

If you believe in all the conspiracy theory about the elite having engineered the Great Depression, and this one, you'll scratch your head and wonder why. It probably has to do with this saying, "it's not enough that I [the elite] succeed, everyone else must fail." That is probably the reason why they engineered the credit bubble of the past and this one. It's human nature, I guess.
PichuTanaka at 07:59 AM JST - 1st February

Who's Depressed. I am happy!!!!
zurcronium at 04:56 PM JST - 1st February

One thing for sure we need to get rid of the empty suits who let this all happen and replace them with a young and vibrant new leader.

I think that would help.
YangYong at 08:40 PM JST - 1st February

Apec: if you're riding by mere luck... don't even get on the train. KNOW and then make a move. The world has lost 40, that is 40% of it's worth in six months, this is going to be very, very nasty.

As for those who say it isn't: Greed is the first mover here, if it wasn't for that... people wouldn't have tried to make as much as they could in as short a time as possible on the back of smoke and mirrors. As for globalisation it is NOT for the benefit of the poor and the dispossessed; no, they are the tools by which globalisation further enriches the already sickeningly rich... the system is mortally wounded, is going to have to be put down and rebuilt. All bets are off. Buy gold. Buy precious stones. Seal your hatches.
SmartPartner at 10:11 AM JST - 2nd February

Thank you for the imput and feedback, some of it was very good, much appreciated. For those readers who are not in a position to make changes in their organization, engage your boss with your ideas, those ideas may help you keep your job or close some deals that keep your company going.
apecNetworks at 04:17 PM JST - 2nd February

To YangYong:

Apec: if you're riding by mere luck... don't even get on the train. KNOW and then make a move. The world has lost 40, that is 40% of it's worth in six months, this is going to be very, very nasty.

If it isn't clear, I will clarify my post. I was primarily directing my comments to those who can do something w/in a company, business, or a govt. office, or someone who has to be right on a decision - only players. Most of my posts are noticed by players. The "luck" that I am referring to is: the sales guy is dead, but by chance he helps the CEO's daughter out of a horrible scandal: THE CEO's sales dept that he has to meet for a sales meeting next month. Luck is important when things are bad.
Bento at 08:28 PM JST - 3rd February

greed was the cause of the housing bubble..the symptom of the fallout of the bubbles explosion is the credit crunch..caused by the "recalculation" of lending risk policy...what allowed this astonishing about face in acceptable lending criteria ?yet again greed. However having said that..the negative effect of the credit crunch is being magnified by the medias unfettered use of hyperbole and predictive news reporting and confirmation bias..which has frightened consumers into the worst of actions..halting spending which hammers demand which in turn results in production cuts and job loses..this is then reported back confirming peoples worst fears and the feedback loop accelerates..happily the same thing that caused the problem in the first place,greed, will eventually solve it..as the price of properties and stocks become so low as to tempt the loosening of purse strings again...this will be the start of the next economic up cycle..which as surely as night follows day will again end in a bubble(feedback loop in the other direction) in some other "investment" sector which just as surely will go bang again..don't overly fret about it is just the result of the human psyche.
YangYong at 04:42 PM JST - 4th February

Luck is losers talk, just Do and win.
SmartPartner at 09:55 AM JST - 6th February

YangYong, well said!
apecNetworks at 06:24 PM JST - 6th February

As long as no one brings up "derivatives", there is no need for any luck.
ca1ic0cat at 04:06 AM JST - 7th February

The not so great depression hasn't hit bottom yet, IMHO. Don't know what to advise we all do but hang on, it's going to be a rough ride.