Business Cyles are Alive and Well

When the economy is booming along, we occasionally hear people theorize that business cycles have lost their significance. Usually, this prophecy is based upon the idea that the Government and the Fed have gotten so good at managing the money supply, only small amounts of inflation and deflation are needed to keep everything on course. The current recession makes this idea look kind of silly, but we will get through this and sooner or later the theory will resurface.

Capitalism has proven to be a great motivator and in conjunction with open markets it has been the proven model for producing economic efficiency. However, it does have at least two forms of instability built into the system that will always be a part of it.

• Old ways of doing business are constantly being challenged by people with new ideas in the hopes that their concepts will make them wealthy. A certain number of times they succeed which puts the old businesses out of business.


• Business owners are incurable optimists about the demand for their products and services, otherwise why would they be in the business. This optimism drives them to over inventory which inevitably produces an oversupply and eventually a slowdown as they try to get those inventory levels back under control.

Recognizing that business cycles are an inevitable and natural part of life can greatly improve your business and investment planning. The tendency for most of us is to think that the next day, month, quarter or year will be a lot like yesterday. It is a mistake to think this way. Better to recognize that we are somewhere around the bottom of a recession and that sooner or later the recovery is going to happen. It’s not hard for me to picture a few years in the future wishing I had bought a lot of Ford stock when it was $2 a share.

Identifying your Business Processes

A process is any set of repetitive steps. It’s important to have a process starting and ending place that makes sense for your size business. Every small retail chain has these processes that make them money.

• Purchasing process – starts with a decision by the store manager to replenish the inventory, through the receipt of goods by the store and ends with payment of the vendor’s invoice by the accounting department.
• Sales process – starts when a potential customer enters the door and ends with their commitment to buy.
• Delivery process – starts with the customer commitment to buy, through their receipt of goods and ends with their payment in the bank, including all the necessary accounting.

Additionally, there are a number of other processes your business may have, such as:

• Payroll
• Media buying
• Store cleaning
• Return Goods Process

Shaving just a little bit of time and cost off any of the process steps has a significant impact when viewed over any 12 month period. If lean mean operations are your goal, the process steps is where you need to be focused.

Business Process Strategy

Trying to be great at all things is a guaranteed loser. Your business must be truly great at something that appeals to your customers and adequate at all others. When you identify what you are, or hope to be great at, you need to identify all those business process that support that “one thing”.

For example, let’s say your “one thing” is superior delivery. You get it there on time, every time, with all the right stuff. That’s why your customers prize you over your competitors. Obviously, your delivery systems must be superb. Additionally, the systems that directly support the delivery systems must be above average. Your inventory system needs to provide the goods for delivery on time, every time. However, if your billing system isn’t the world’s greatest, your customers won’t leave. If billing was so important to them, they would already have left for the competitor with the superior billing process that probably isn’t that good at delivering on time.

When you identify the processes critical for the application of your business strategy, you know what processes need to be constantly improved to stay on top of your game. I recommend you formally review these systems at least once a year to explore what else can be done to keep them in superb shape.

The other processes only require being adequate to good. To spend money and time building a truly superb payroll system when your business advantage is speedy delivery is a waste of resources and poor management. Instead, regularly review the list of these processes and ask, “Is this business process adequate?” Fix those that are not and then go back to work on your critical processes.