Firms Share Lessons of the Recession
In the brutal economic slump, few companies have been left untouched. Businesses told us they’ll do things differently in the future.
As the economy starts to pick up, consider the lessons learned in this recession. We asked owners and managers of U.S. businesses -- big and small, public and private -- to share what the brutal slump of the past two years has taught them. Here’s what they told us:
Borrow less, save more. The biggest change businesses say that they’ll make is to exercise more caution about debt and make a stronger commitment to beefing up their rainy-day funds.
It wasn’t just the rapid evaporation of demand that left them determined to make changes. It was also that many felt blindsided by the financial crisis --caught in a maelstrom not of their own making. For example, a large commercial truck dealership that serves several Southern states was stung badly by a big interest rate hike, even though its credit rating and balance sheet were rock solid: It was the bank backing the firm’s corporate bonds that went wobbly.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Diversify. A Kentucky machinery business acquired a new appreciation for its broad customer base…about 5,000 customers, none of them accounting for more than 15% of the firm’s business. A Florida builder learned the hard way when some of its few, large clients unexpectedly faltered.
Be flexible. A Virginia firm that makes compressors expects to reap lasting benefits from its newfound responsiveness to its customers’ needs. The company’s product mix has shifted, and it’s finding more demand for customized goods and less for standard products in its catalog.
Stay vigilant on costs.company owners and managers confess to complacency in the years leading up to the slump. Administrative expenses -- office supplies, paperwork requirements and so on -- plus personnel costs had escalated too far. Clauses for automatic increases had crept into contracts with outside vendors. And small charges for nonessential niceties were adding up to big bucks.
Many businesses say the recession forced them to look more closely at their operations. Economies forced on them by hard times now will add to their bottom lines when the economy picks up.
Make compensation more flexible -- more closely tied to both performance and workload. Some companies are slicing expenses by shifting middle managers, who can account for a big chunk of payroll, off salaries and on to day wages. An anesthesiology practice moved nurses from salaries to hourly wages and doctors from salaries to a share of profits. There’ll be more bonuses and fewer salary hikes, even for strong performers, and more folks will work on commission.
Upgrade your workforce. Recessions are not only a time for judicious pruning, they’re also an opportunity to nab top-notch workers. A Midwest accounting company, for example, let subpar workers go. It expects to benefit from more productive new hires for years.
When cuts are necessary, don’t dawdle. Most firms that bit the bullet early credit their doing so for their survival. Many that didn’t act swiftly wish that they had and avoided digging themselves into a deeper hole.
But there are exceptions: A Tennessee scrap metal operation that stubbornly held on to its workers was the only local firm with the resources to do the job when several big new contracts turned up. If you choose to take the risk, be sure your decision is based on more than wishful thinking.
Finally, focus on marketing. A Michigan construction firm that advertised throughout the slump is now gaining market share, while rivals that abandoned marketing as business thinned out are gone. As one metals company owner says succinctly, “Only sales will get you out of a hole.”
For weekly updates on topics to improve your business decisionmaking, click here.
To continue reading this article
please register for free
This is different from signing in to your print subscription
Why am I seeing this? Find out more here
-
TikTok Ban Passes Ahead of Meta Earnings: What To Know
Lawmakers voted in favor of banning social media platform TikTok just ahead of rival Meta Platforms' earnings report.
By Joey Solitro Published
-
Why Tesla Stock Is Soaring After a Q1 Earnings Miss
Tesla came up short of analysts' expectations for its first quarter, yet its stock is roaring higher today. Here's why.
By Joey Solitro Published
-
The Robots Are Coming... But Not For a While
The Kiplinger Letter There’s excitement in the tech sector over the potential of humanoid robots, but widespread adoption is likely to be years away.
By John Miley Published
-
Farmers Face Another Tough Year As Costs Continue to Climb: The Kiplinger Letter
The Kiplinger Letter Farm income is expected to decline for a second year, while costs continue to up-end farm profitability.
By Matthew Housiaux Published
-
H-1B Work Visa Rules Get a Revamp
The Kiplinger Letter H-1B visas allow employers to hire high-skilled foreign workers. Regulators have finalized new rules for this visa program following last fall's proposal.
By Matthew Housiaux Published
-
Woes Continue for Banking Sector: The Kiplinger Letter
The Kiplinger Letter Regional bank stocks were hammered recently after news of New York Community Bank’s big fourth-quarter loss.
By Rodrigo Sermeño Published
-
Are College Athletes Employees of Their Schools?: The Kiplinger Letter
The Kiplinger Letter A recent ruling has ramifications for labor relations and the unionization of student athletes.
By Sean Lengell Published
-
Salton Sea Clean Energy and Lithium Project Gets Approval: The Kiplinger Letter
The Kiplinger Letter California's Salton Sea is due to see the construction of a new lithium extraction and geothermal clean energy power plant.
By Matthew Housiaux Published
-
More Woes for Anheuser-Busch as a Strike Looms: The Kiplinger Letter
The Kiplinger Letter Drinkers of Anheuser-Busch beers may want to stock up soon. A looming strike threatens to shutter its U.S. breweries later this month.
By Sean Lengell Published
-
The Auto Industry Outlook for 2024
The Kiplinger Letter Here's what to expect in the auto industry this year. If you’re in the market for a car it won’t be quite as daunting as it was during the pandemic and after.
By David Payne Published