Dan Schneider

Recessions and Succession Planning: Building Value in Sour Times
January 16, 2008

As I am writing this article, the Market – which is not the economy – looks like a cliff dive from the old ABC Television show called the Wide World of Sports. The business pundits are using the evil “R” word. Ben Bernacke, the FED Chairman, is telling everyone who will listen, “Not on my watch.” And we’re all left trying to boost Business Performance , one of the ten integrated pieces of succession success, so that we hit strategic goals, sustain OR continue to BUILD the financial value of our businesses, and create a larger legacy. 

Assuming you’ve developed your Strategic Plan using an approach similar to or identical with ours, your plan is the blueprint to sustaining and building upon your past successes. IF economic conditions do turn down, many of your competitors are going to put their plans on the top shelf and conserve cash. They will try to save their way through a recession by curbing operating expenses. 

There is, of course, an alternative to pulling back. You can choose to move ahead with your strategic plan. Some companies in your industry are going to gain market share BECAUSE of a recession. You might as well be one of them. Calculated strategic decisions to move ahead with research and development, acquisitions, and focused operating expenses actually increased the market valuation of many companies in the last two recessions. Those who were successful had several things in common:

1. They spent to succeed, so they made some acquisitions and introduced new products/services.
2. They traded short-term profitability for longer term gain.
3. They refocused rather than cut operating expenses. They actually increased their sales, general, and administrative expenses.
4. They identified and introduced new products and services that helped them become industry shapers rather than industry followers. 

In short, the more successful companies responded to sour times by building flexibility related to three important gauges of Business Performance:

• Balance Sheet Flexibility;
• Operating Flexibility; and,
• Product /Service Offering Flexibility.

Each of these gauges can be modified through an effective Strategic Planning process. The whole point of strategic planning is to prioritize how you utilize your resource package: People, Time, and Money. Technically, we are not in a recession; but some prophecies take on a life of their own. Remember, the periods of great uncertainty, where competitive and financial landscapes changing almost overnight, can be the ideal time to make strategic gains in market share and industry leadership. Your strategic plan and you overall succession plan can be just the tool to make it happen.

Posted by Dan Schneider on January 16, 2008 | Comments (0)