DI Editor Jim Cramer points out why, in addition to sound financial stewardshiop, in the end, it will be our relationships with our clients that will carry the day.
As of the end of April, about 61% of firms are reporting a downturn in their business. Contracted projects have been put on hold and many firms report that their backlogs are shorter than at this time last year.
How about your own situation? You may be one of those who still has a strong backlog and healthy profits. Perhaps you just got a plumb project and are still recruiting new talent. You are in a new minority.
For perspective, during the last 135 months we had about six months that showed significant downturn signals—the last six. Yet many in the design professions say that they are unconcerned and plan on going forward expecting that the months ahead will resemble the average of the last 135. We don’t recommend that plan.
While the nasdaq bubble was largely restricted to the technology sector we also see an overall lack of confidence in the near term future economy. That means that other sectors will likely be affected—including those served by your firm.
It’s quite possible that some of your clients may be more pessimistic than you are. That could spell trouble if you are not in a relationship with a depth of synchronicity with them. The rapport between you and your clients on the business outlook should generally be in alignment. Just as you are a business partner with your clients serving needs and offering services you also want to have depth of personal relationships and shared values on business issues. This is the test of a truly client centric firm.
How do you get ready for what is next? There are numerous scenarios of course. This is how we frame a response to that question. Now is a time to be prepared for the unexpected. This means that you should position your business model for sustainability and agility and build your repute and trust. You should have about 22 months of staying power as manifested by the strength of your balance sheet, your reserves, your personal savings, and your emotional stamina.
Why is 22 months the right number? Bubble-induced recessions last 22 months on average, twice as long as inflation-caused recessions. Each sector served will be different and some may not be affected much. If you are a diversified specialist you will have the most resiliency.
Beyond the financial considerations, we believe that a trust-based relationship that is marked by a broad range of deep personal experiences and shared business values will give you extra staying power for what lies ahead.