So, What Did You do After the Great Depression of 2008?

I can’t help but wonder what some business owners will ask themselves about what they did to change the trajectory of their businesses 10 years from now when they think back to a time when interest rates were the lowest in fifty years, the prime rate was zero, great employees were readily available, the internet made the size of a business irrelevant to customers. I hope they aren’t the ones that answer the question by saying ““I spent my time whining, waiting, worrying and wishing for things to get better.”

It’s time to stop thinking about how crazy the times are and start thinking about what crazy times demand.  For most of us, 2011 represented two very different years; the first half being more robust than the second half. From where I sit, 2012 feels solid and quite balanced. But it’s not “Deja vu all over again” as the famous philosopher Yogi Berra once said. This time around our clients are working outside banks to source operating capital, finding new strategic partners or forming alliances that help enhance their competitiveness and getting closer to their customers than ever before in very different ways.

The goal is time around isn’t just to grow sales and market share; it’s about growing business profitably. I have some thoughts to share along those lines.

First, small businesses need to” get out of the banking business” as my friend Lara O’Conner Hodgson proclaims.  Most businesses don’t even realize they are in the banking business, but they are, financing inventories for their vendors and receivables for their customers.  They take the same risks as banks (in fact backed by their same personal guarantees), only they don’t receive interest from their loans to their suppliers and customers!

However, when more cash is needed to fund new growth opportunities, buy new equipment or hire people in advance of product shipments, where does it come from? Not from a bank line of credit if you’ve been in business less than three years or don’t have a need for a loan because you have excess cash on hand. But being in business for less than three years isn’t a prerequisite for achieving phenomenal revenue and profit growth.

In order to achieve success in working “outside the banks” to acquire capital, owners must first optimize their own working capital to provide more cash internally. Next, they need to insure that their business design (customer selection, differentiation and scope) not only produce profits, but protect the profits they earn from their competitors.

I am fortunate to be working with a few clients who are currently exploring ways to finance exponential growth because they were successful in creating excellent business design that their customers love! These companies refused to pull a manhole cover over their heads and wait for better times. They were able to grow profitably in a tough economy because they had a structured, disciplined approach to do so.

There has never been a worse time for business as usual. Let’s get to it!