Spotting the Early Warnings

Half the time it's boom; half the time it's bust. No business that cannot survive tough times will keep its shingle up for long. The sooner you recognize the symptoms of a general economic downturn, the more likely you are to weather the worst of the storm. Your business sector may be hit earlier or later than the rest of information technology. And IT itself may be among the first or last to be pinched depending on whether it is considered cause or effect of the latest economic fluctuation.

You can't rely on the press or TV to give you an advanced warning that heavy weather is coming your way, so always keep you eye out for the following:

♦ Sales slowing

♦ Customers extending payment cycles

♦ Production costs creeping up

♦ Major contract approvals are delayed

♦ Large orders get cancelled

♦ Promotional efforts bring disappointing returns

♦ Cash reserves begin to dwindle

♦ Staff turnover declines

First you have to ask yourself the fundamental question: Is this recession likely to be a short or a long one? The average length of the recessions shown in Table 18-1 is 16 months, but this is only the bottom of the down cycle. Trading conditions that affect a business adversely may be twice that long.

In a recession men and women have the same intelligence, skills, and abilities as they do in a boom. So the only thing that can reverse the spiral is what the bankers and politicians do. Until they take effective corrective action to restore people's confidence in themselves, nothing beneficial can happen.

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