The Day The Earth Stood Still
I have always been a fan of sci-fi movies and television shows. My first sci-fi memories are of the Flash Gordon programs on TV - those lame plots and graphics were pretty exciting for a six year old. And when Star Trek came along, I was hooked.But the coolest flick was the 1951 classic, The Day The Earth Stood Still, starring Michael Rennie and Patricia Neal. It was about an alien who came to earth - Washington, D.C. - and lived among us. His mission was to convince us that "others" didn't like the way we were conducting ourselves here on earth - specifically, nuclear proliferation.
When Rennie's character, Klaatu, couldn't convince us to change our ways, he arranged for something very dramatic to get our attention. He made the earth stand still for 30 minutes: all devices, machines, public and private conveyances, everything stopped.
Then, addressing all Earthlings as if he had been hard-wired by CNN, Klaatu said if we didn't heed his warnings, his people had the ability to "reduce Earth to a burnt-out cinder."
Terrible Tuesday
On Tuesday, September 11, 2001, beginning at approximately 8:45am EDT, aliens came to earth and made it stand still. Like Klaatu, these guys had unusual sounding names. But unlike him, they didn't bother with a warning.
In addition to the enormous toll on life and property, the latter-day aliens succeeded in stopping not motors and such, but those who use these things. As if in shock, some of us were stopped for a day, some for a few days, and some are still not fully functioning almost two weeks later.
Some have compared what happened on 9-11 to the infamous attack on Pearl Harbor. I say it was worse. What happened at Pearl Harbor may have changed the world, but it didn't stop the world.
We're In For A Rough Ride
Recently in this space I talked about how the unprecedented economic deceleration in fourth quarter 2000 sent shock waves through our economy. And even though 2001 wasn't going to go down in history as a stellar year for our economy, we were hanging in there. We even had a chance of avoiding a technical recession.
But in economic terms, Q4 2000 will now be seen as a speed bump compared to what happened when the earth stood still on September 11, 2001.
I have no idea what motivates the hateful and heartless. But even in the terrorists' diabolical little minds, it's difficult to believe that they could have anticipated a result that literally shut down the number one economy on the planet for days, and stopped millions of Earthlings from going about their lives around the planet.
But that's what happened, and you and I are left to pick up the pieces of an already weak economy, dealt a major body blow.
I think you know I've always tried to write from a positive perspective. But I've also never pulled punches. My friends, buckle your seat belts, we're in for a rough ride. Here's are some of the reasons:
• Recent events are so unprecedented, we won't even know the total economic impact of all this for months. Early reports are trending ugly.
• Downtown NYC will take 6 months just to clean up. The news outlets will dutifully report the progress every day, probably called "Ground Zero Watch," thus reminding consumers of why they don't feel confident.
• I'm not a stock market expert, but I know that a year ago less than 100 public companies issued Q4 profit warnings. This year, BEFORE Terrible Tuesday, over 300 companies had issued Q4 warnings. What's going to make the stock markets come back any time soon?
• Ten years ago, approximately 20% of Americans were invested in the stock market. Today that number is approaching 50%. With a depressed stock market, half of America feels poor, even though much of the loss is on paper, and even though many are still ahead of where they started. Consumer confidence was already down prior to 9-11. What's going to encourage consumers any time soon?
• Announcements have been made of thousands of layoffs and furloughs resulting from the earth standing still, and there will be others. No confident consumers there.
• According to our government, we are at war. Even those of us who think we know what that word means, don't know what it means this time. And it's likely to be a definition that will be months, if not years, in the making.
• As we wage this war, each report will have either encourage or worry us. Either way, it will be distracting to consumers. And distracted consumers are not very good at what they do best.
With all of this in mind, I believe a recovery of any significance won't happen until well into 2002, and likely not until 2003.
Ten Things We Need To Do Immediately
1. Don't miss a sale, but don't let one piece of inventory spend the night in your building unless it's absolutely essential. Remember, inventory is cash you can't spend until you convert it by making a sale. Declare war on excess inventory.
2. Review ALL operational steps and eliminate or tighten up the inefficient ones. Remember, we'll take dollars, but we're looking for pennies.
3. Review ALL contracts for services received and make sure you still need those services. I promise your customers will be doing the same thing. Get ready.
4. There is one bright spot: The Fed lowered the Fed Funds Rate to 3% last week. That makes prime 6%, the lowest in years. Talk with your bankers about changing your term loans to reflect the lower rates. If you have demand notes outstanding, like a 90-day note, that rate will adjust automatically if the loan is renewed. Also, look for refinance opportunities on real estate.
5. Keep your bankers informed about how things are going. The title of the shortest book ever written is Loan Officer Courage. An uninformed banker is a scared banker. And no one ever got any help out of a scared banker.
6. Let's face it - your people spend most of the money in your operation. Have a company meeting with everyone and tell them it's belt-tightening time. Ask them to help you identify ways to maximize margins and cut expenses. Write those things down and put them into your new budget and your operation. What's their motivation? How about job security?
7. If you rent, have a pow-wow with your landlord. You two might have to work something out if the rent conflicts with your new budget. Don't expect the landlord to take a major hit, but he or she knows that there might not exactly be prospects lining up to take your space if you leave. This is a good time to be creative.
8. If you have non-performing assets, convert them to cash. Even if you have to sell for less than you want. What things were worth last year has no bearing on what they're worth today, and they might be worth less tomorrow. If it's not performing, cut it loose.
9. Profit is the Queen of business, but cash is King. Tighten up your credit terms. Have a meeting with your sales staff to make sure they understand the new policies. Stay close to your accounts receivables. Real close.
10. If it's humanly possible, personally call on EVERY customer at least once in the near future. Just like I'm doing here, don't pull any punches. We're in this together, so let's be honest with each other. It's the only way we can be part of each other's solutions instead of part of the problem. Once you've had a mano-a-mano with your customer, convey to your people what you discussed, learned, and agreed to, and turn the account back over to them.
Write this on a rock... Small business creates over 50% of U.S. GNP. Consequently, we will be critical to the economic recovery process. But we can't participate if we don't survive. Take action today to insure your survival. And don't forget to buckle up.
