Does Your Business Need to be Leaner and Meaner? (Part 1)

I’ve been surprised by the tone of my clients’ conversations since the beginning of the year. They want to get tougher. They want to plan more. They want to find the chinks in their armor, and sharpen their weapons.

These are businesses that came through the Great Recession, often with flying colors. They remained profitable, and in some cases set records for income. They continued to grow. To any casual observer they became “lean and mean.” Yet the overarching theme seems to be “We still aren’t good enough yet.”

All small business owners do well by cultivating a healthy streak of paranoia. Even on an average day there are enough potholes out there to knock your company out of alignment, and a few that can take a wheel off. Even so, owners tend to dodge challenges as they arise, and not spend too much time looking down the road.

These haven’t been typical New Year’s Resolution types of conversations.  They are something deeper than that. They evidence a general uneasiness about what’s coming. While the owners hope that things will get better, they fear that they will get worse.  It’s a feeling that someone, somewhere is plotting at this moment to take their business away, and a desire to be ready before they can even identify any specific threat.

Certainly there are enough clouds on the domestic horizon to give anyone pause about the potential of the coming year. We face a dysfunctional national government, higher taxation, increased mandates for employers which will carry unknown costs, anemic job creation, global competition, and a difficult lending market.

Internationally we have Iranian atomic ambitions, North Korean missiles, a European recession, China’s growing influence and increasing instability in the Middle East. While these don’t affect most American small businesses directly, they add to the incessant drumbeat of negative information crowding the airwaves.

So is this new-found focus on getting leaner and meaner based on a realistic need for improvement, or is it merely an emotional reaction to the media’s insatiable appetite for “crisis content?” I think it is the former. Small business owners need to be more competitive, even those who have already stepped up their game considerably since 2008.

I write and speak extensively about “The Boomer Bust,” the inevitable economic impact of retiring Baby Boomers. For the last 50 years, the American economy has grown on the population bubble of a generation who were both prolific producers and voracious consumers. A rising tide lifts all boats.

Now that generation is stepping back from both production and consumption. You can’t change demographics. The four European countries with the lowest birthrate over the past 30 years are Greece, Spain, Portugal and Italy. Their politicians don’t want to discuss that problem, because it is one they cannot fix. The USA has had sufficient population growth to avoid the dramatic GDP shrinkage of those countries, but we still face a decade or more of serious drag on our economy until the Millennials begin to enter the workforce in large numbers.

Our government, especially the current administration, is trying to provide a minimum standard of living and health care for both the ageing Boomers as well as for those who are marginalized by a lack of relevant education and training. They have to do it on revenues from a smaller, less productive generation caught in between. Some economists say that the recent “Fiscal Cliff” tax increases represent about one-third of the new revenue needed to accomplish this, even if we reduced spending by five times as much as currently planned.

History is inevitable. It can’t be changed. This is an effect of history, not merely of current events. I’m not deluded enough to believe that small business owners can impact the EU, or fix the Federal budget. We can only run our businesses.

I think the owners who feel the need to be better are correct. The efficiencies we engineered to survive the recession were just a start. The successful small companies of five years from now will look and function very differently. Next week we will begin to discuss how and why. I encourage my readers to pass this first installment along to other business owners who want to be among the survivors.