As is often quoted, “Don’t let a good crisis go to waste.” We’d like to make a case for, “Don’t let a good recession go to waste.”This morning oil is below $40 a barrel and more and more economists are throwing around the ‘R’ word – recession. We’re not out of the woods yet and ATB Financial’s most recent Business Beat tells an interesting story about how companies in this province are reacting. Looking through our consulting lens, some of the most surprising, and perhaps alarming, responses by entrepreneurs show that:

  • Only 41% of have responded to the downturn by changing business processes to increase efficiency or productivity
  • 21% of owners have or plan to invest personal resources back into their business
  • Only 9% have negotiated a new loan

Seems a lot of owners have not been proactive in making changes in their business, and instead are choosing to ride this out. But what if that’s not enough? Recession Stat

According to a Harvard Business Review survey of 4,700 public companies through three global recessions, 17% of companies don’t survive a recession (they went bankrupt, were acquired or became private). Among those that do continue, “The survivors were painfully slow to recover from the battering. About 80% of them had not yet regained their pre-recession growth rates for sales and profits three years after a recession; in fact, 40% of them hadn’t even returned to their absolute pre-recession sales and profits levels by the end of that time period. Only a small number of companies—approximately 9% —flourished after a slowdown, doing better on key financial parameters than they had before the recession and outperforming rivals in their industry by at least 10% in terms of sales and profits growth.”

And things aren’t necessarily different for Alberta’s private sector companies. Consider Alberta Venture’s fastest growing companies 10 years ago, before the last recession. Of those with less than $20 million in revenues in 2005, 13 (52%) no longer exist today, were acquired or merged. Companies reporting over $20 million in sales haven’t fared much better with 48% failing or becoming the target of a business acquisition, despite their impressive growth rates back then.

It’s clear that even for successful companies, holding tight isn’t the best plan of action. Nor is simply laying off staff or cutting deep and fast. The Harvard Business Review article goes on to prescribe a multi-pronged approach that has the highest probability of beating the odds: focus on operational efficiency to reduce costs and “invest relatively comprehensively in the future by spending on marketing, R&D, and new assets.”

But what efficiencies and which investments? In making these decisions, a comprehensive review of the company needs to be made in 5 Key Areas:

  1. Finance
  2. Operations
  3. Marketing & Sales
  4. Business Controls
  5. Human Resources

Without an overall assessment, decisions required to survive and thrive are made with a handicap. For those struggling to find the time to undertake this review, or to be completely objective in their assessment, Omni MCA has created the Organizational Stability and Growth Plan. Long name – simple premise.

Working with your management team, we’ll review your business, make key recommendations and create a forward looking map that carefully balances the need to cut costs and invest in the future. Not only will this project help you make decisions for your business, but it’s the kind of stuff financial institutions also want to see. In recent discussions with major banks, we’re hearing that many want to help their clients further, but can’t unless they have this package of information in front of them. Only then can they renegotiate terms, offer new financing, postpone payments, consolidate debt, etc.