By: Tiffany Bates
Money hides all sins. This truism is especially relevant during times of economic prosperity. When the money keeps rolling in, the necessity of scrutinizing expenses and analyzing budgets drifts to the wayside. Senior executives in corporate America and small business owners alike find themselves engaged in patterns of frivolous spending, and somewhere along the way forget the simple things, like measuring ROI. That is, until the bottom falls out of the market. Now it’s all about ROI (and CYA). Sound familiar?
Economic recessions get a bad rap, generally speaking, but they remain a necessary evil. A recession is simply the market’s way of correcting itself; it’s part of the business cycle. Economic recessions force businesses to improve operational efficiencies, or perish. All of a sudden, scrutinizing expenses and analyzing budgets jump back to the forefront as businesses frantically identify strategic ways to control costs (versus arbitrarily cutting costs). When looking at a recession in retrospect, history remembers layoffs, the rise in unemployment, and the devastating effects on Americans. However, history often fails to emphasize the fact that recessions force businesses to improve efficiency and productivity in order to survive, and ultimately positions them for growth when the economy expands again.
The most successful businesses understand (and excel at) the following three things:
- managing people
- managing money
- managing time
It’s Economics 101: the scarcer the resources, the greater the need to do more with less. Economists tell us taking into consideration the opportunity costs associated with each decision ensures efficient resource utilization. In layman’s terms: all things considered, identify which choice gives you the biggest bang for your buck.
The Great Recession itself came as no surprise, but its depth and scope sent us all reeling. Two years into the recession, the shock worn off, what lessons were learned? It’s important to recognize the businesses that collapsed did not fall victim to the economy, but rather fell victim to their inability to manage their businesses. Managing a business effectively means measuring ROI of every dollar spent in your budget, from digital office equipment to electricity. (Have you ever tried working by the light of a kerosene lantern?)
In conclusion, if your business principles and metrics are sound and consistently applied, you’ll be positioned for success whether in a economic recession or not