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Will your business survive the economic recovery?

Guest post by: Michael Smyth

Article Overview: At 30 kilometres Adrian hit the wall. His body just stopped, unable to run any further. He looked down at his feet and he barely had the energy to put one foot in front of the other. As he looked up, he saw runner after runner pass him as he saw his target marathon time slipping away before his eyes. The current economic downturn has been a marathon for each and every business in New Zealand and we are not out of the woods yet. But with the end in sight, will your business suffer like Adrian, or will it sprint towards the finish line?

Will your business survive the economic recovery?

At 30 kilometres Adrian hit the wall. His body just stopped, unable to run any further. He looked down at his feet and he barely had the energy to put one foot in front of the other. As he looked up, he saw runner after runner pass him as he saw his target marathon time slipping away before his eyes.

The current economic downturn has been a marathon for each and every business in New Zealand and we are not out of the woods yet. But with the end in sight, will your business suffer like Adrian, or will it sprint towards the finish line?

Where Adrian went wrong

Most marathon runners will tell you that the experience of hitting the wall can be avoided with proper training and careful planning. Training to make sure you are properly prepared for the event and planning to make sure that you get your nutrition and fluids right, both before and during the race.

Adrian didn’t get specific advice on his training, nutrition or preparation. Sure, he had surfed the internet for tips and tricks, carried out weekly runs in the lead up to the event, and drank water as he went. However, what he lacked was a plan which brought all these strategies together and had been tested to make sure that it would get him to the finish line. Had he such a plan, it would have been apparent that his training and nutrition were inadequate to get him to the line.

Most small businesses will be inadequately prepared to capitalise on the economic recovery

Just because your business has survived the recession, it is no guarantee that it will survive the recovery. If you have downsized in the recession, you will want to grow in the recovery. But business growth is just not about getting more employees, strategic alliances, distributors, contractors or agents and hoping for the best. You only need one of these relationships to go sour and your hard work throughout the recession will be lost: you will hit the wall.

Michael Gerber in the “E-myth” talks extensively about systemising your business for success. Your legal agreements are the very foundation of each system in your business because they set the terms of your relationships and ensure that your relationships with other businesses work in harmony to meet your objectives. If you don’t have well drafted legal agreements in place, your chances of hitting the wall drastically increase.

For example, say that your employment agreements do not contain properly drafted restraint of trade clauses. As your business comes out of recession, one of your employee’s sees an opportunity to set up on his own and in the process takes half your client base. Just when you thought you were poised to take advantage of the growing economy you receive a major setback. To give another example, say that your terms and conditions of business are inadequate. The economic recovery leads to more work and more clients, but one of those clients’ defaults leaving a big hole in your cashflow. If your terms and conditions don’t allow you to recover that money quickly and efficiently then your business growth will be stunted.

The thing to realise, is that every single relationship your business has with another business has the potential to go wrong. Your job as a business owner is to make sure that it doesn’t and cause your business to hit the wall.

How not to hit the wall: get the basics right from the beginning

Richard Branson sums up the attitude every business owner should take to legal documentation in his new book Business Stripped Bare. There he says: Back in 1971, when I was more gung-ho, I wrote in my notebook, “we don’t need lawyers”. But over the years, stating our agreements in clear and unambiguous terms has provided, again and again, to have been vital for our success...Incurring legal fees can ruin your start up, but the answer I now think, is not to ignore the lawyers, but to get the basics right from the very beginning. Any start up business should sit down and take a long hard look at its legal agreements.

So, if you don’t want to hit the wall in your business as the recovery looms, take a long hard look at your legal agreements to make sure that they are watertight and that they achieve what you want them to achieve.

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Article Tags: business, economic downturn, economic recovery



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