Thursday, January 28, 2010

Be Prepared for Slower Growth

It sounds strange but positive thinking may not always be the best course of action. This is true most recently when many businesses have had to weather the storms of the current economic recession.

A recent survey by a major American consulting firm concluded that many businesses have failed to adequately prepare for further slow growth on the economy. While they may have taken measures to keep afloat in the current economic climate, they have assumed that better times are down the road. However, as many current indicators project that the "better times" are still at least two years away, if not more, the fear is that companies may not be prepared.

One of the problems is that preparation for long range financial problems differs from the short term. In order to balance the books presently, some businesses have trimmed administrative overhead and tried to curb spending. But, long term would mean trimming the payroll and restructuring debts. In an era when executives are trying to be optimistic about the future, these "hard-line" steps are far more difficult to make. Business executives realize that profits will be down for awhile but they truly do not expect the downturn to last that much longer. They would rather gamble on a few positive signs as indicators of sunshine rather than admit that the storm may not be over. For many companies, that outlook may be perilous.

Economists feel that we are not yet out of hot water. Cautious optimism may be the best idea but the emphasis is on caution, not optimism. It would be wise for the business community to take precautions in advance of any further problems. Be prepared to handle the economy based on reality, not predictions.

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