Prepare for Uncertainty

This is the time of year when many individuals set new goals for the upcoming year.  Smart companies have already been planning for 2016 carefully and have finalized or are in the process of finalizing their forecasts.  I am a huge believer in setting goals and action plans to achieve those goals.  It is simply amazing how much can be accomplished and efficiency gained by setting clear future targets and then working toward the target.  However, regardless of how meticulous business leaders are in setting future plans,  things they did not expect often surprise them and often make prior plans obsolete.  The boxer Mike Tyson stated truthful words when he said, “Everybody has a plan until they get hit (Berardino).”  These are uncertain economic times.  Who knows from where the next hit will come?   It will come, and smart businesses need to prepare for uncertainty.  I suggest the following:

  • Increase and Hold Cash– During the last financial crisis in late 2008, companies that had sufficient cash were able to handle that financial hit much better than those who had few cash reserves. After that crisis, Ram Charan said, “Protecting cash flow is the most important challenge almost all companies face today whether they realize it or not.  Pursuit of revenue growth must give way to understanding the cash implications of everything your company does.  You absolutely must have sufficient cash or credible access to it to weather the storm(Charan, p.10).”  To prepare for uncertainty, know your cash position daily and forecast the cash position every month at least three months ahead.
  • Pay Down Debt– Highly leveraged companies are in trouble when a financial hit strikes. The reason is simple.  You lose control of your business to outsiders.  The lender becomes the master and begins to call the shots.  You, the leader, need to stay in control of your company and its destiny.  Build cash reserves and pay down debt now to prepare for uncertainty.
  • Hire and Keep A-Players– Business leaders always want the very best people on the team that they can afford.  When a financial crisis hits your company, a team of A-players are a blessing.  They are more efficient and can increase their productivity.  A-players also tend to think of the company as their company.  They have the mind set of an owner, which means they will work hard to survive and remain loyal when times get tough.

Prepare now for the uncertainty of the future by increasing cash, paying down debt, and hiring the very best people you can afford.

*Berardino, Mike (November 9, 2012), Sun Sentinel

*Charan, Ram (2009), Leadership in the Era of Economic Uncertainty

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