Flat is the New Normal

By Nigel Hartley, Guest Contributor

If you are waiting for the economy to go into a massive boom before you make critical business decisions, you might be waiting a long time. Today’s market is flat, and business owners will need to apply different strategies to manage resources for growth now, and into the next boom.

We recently asked a client company, “How long have you been in business?” They replied, “We started in 2003.” We pointed out that over this period they’d spent around half their time in startup. They’d spent the other half in survival mode to manage their way through the biggest depression for 100 years. They said, “That really puts things in perspective. Now we understand why we feel the way we do!” Just as growth was kicking in for this company, the markets fell around them.

We said, “Rather than sitting around waiting for the next boom to come along, get used to the idea that we’re in a flat market. Let’s say we’re going to be in that market for another five years. There’s no point in waiting for market recovery.”

Recovery will be a long time coming

Analysts say we’re currently in a “hesitant and uneven recovery.” There are bumps and spikes, but overall, the recovery remains flat. We’ve been traveling across the current flat economic phase since September 2009. On average, forecasters predict this phase will last somewhere between 2012 and 2016, with some even predicting that this flat phase will last more than 20 years.

Flat is the New Normal

What is the take-away from these predictions? Right now, businesses need to adjust to the fact that the flat market is the current market—or the “new normal”—and will be for several more years. Creating a new view of “business as usual” is essential.

Basic #1:  Build a strong platform for economic growth

So how do you plan for growth in a way that syncs with where the market is right now?

The right approach for a flat market is one that ensures you will generate cash. So over the next five years or so, businesses should build a strong platform for economic growth.

Essentially, this means planning for optimal productivity by having the right number of people doing the right jobs with the right level of skills. At Shirlaws we call this “Capability and Capacity.”

Why worry about productivity when most businesses feel lucky just to survive? Productive businesses have cash, and with cash, you can create growth. It’s the businesses currently running at zero profit—with the same cost base as revenue base— that won’t have any cash for growth. Don’t fall into this trap.

 At Shirlaws, we help business owners ascertain the formula that will allow them to optimize productivity and maximize cash with a Capability and Capacity Plan.