Summertime, and the livin’ ain’t so easy

Most years, we roll into June and start looking ahead to the summer. The weather heats up, students get out of school; we find the bathing suits and make vacation plans. This year is different. The economy has been dealt a body blow. Many people have lost their jobs and are figuring out how to just get by. Many of those still working are concentrating on reducing their debt and cutting back on vacations. The atmosphere in general seems much less about summer fun and much more about serious life decisions.

Given that the recession began in December 2007, companies already have endured eighteen months of difficult business conditions. And at this point if you are still in business, your company falls into one of three basic groups: those who are thriving, those who are surviving, and those who are dying.

Unfortunately, many of those in business do not take the time nor have the insight to truly determine in to which of these categories they fall. Business owners and the advisors who serve them need to acknowledge where their companies stand. Here are a few sign posts to look for in each area:

• Thriving: Sales are up and the general company morale is up. There’s plenty of liquidity, and bankers smile when you enter the room. This group is made up of tech firms (likely early stage), Wal-Mart and other big box discounters.

• Surviving: Sales are flat or only down slightly. Bank lines are still in place, albeit with higher interest rates and fees. Morale is cautious, and the overall outlook is satisfactory but uncertain; some layoffs have taken place. Collections on receivables are slower, and cushions are gone. This group sadly represents most of the U.S. industry.
• Dying: Sales are down dramatically. Serious job cuts have taken place. Credit lines have been pulled or interest rates jacked up. Capital is badly needed, and bankruptcy is a feared possibility. In this group we see U.S. carmakers, mortgage companies, luxury goods retailers and all those companies that are woefully undercapitalized.   Mike Oleksak 2009