Recessions We Have Known and Loved

For the next 30 seconds, join me on a nostalgic ride down memory lane. If you are older than 40, you remember those lost days of youth, “The Good Old Days”. Way back then, we had us a grand old recession. Like good recessions everywhere, it came with the standard recession-driven un-pleasantries. But ours came with more - Ricardo Montalban’s rich Corinthian leather and a few ultra-nasty options.

For our junior readers, allow me to elaborate. We had Stagflation – where the inflation rate and unemployment rate are both high and seemingly stuck in that position. We had an energy crisis – actually we called it the Arab Oil Embargo. Rockford, IL had unemployment pushing over 25 percent and the prime interest rate was 21.5 percent, in 1982 (really). When I bought my first house, my dad quipped, “Why didn’t you put it on your Master Card? The interest would be lower.”

What does this little back-in-the-good-old-days rant have to do with anything in 2011? When the 1980s model recession was over, a new level of optimism spread over the nation. And, even though the months before were the worst on record, we all felt great about the future. We were so optimistic; we hardly batted an eye when the nation’s seventh largest bank folded. Today, that isn’t the case. Most of us suffer from a newfangled form of uncertainty. We are still struggling to decide what course of action to follow.

We’ve just attended the first round of post-recession conventions, association meetings and networking sessions; most of our friends are posting some reasonable months. In a few instances, our pals are crowing - business is actually good. The recession is over, but things have changed since those great recessions of the past.

Forecasting is harder in today’s climate
Today it’s nearly impossible to comfortably forecast future business levels using traditional methods. This is a radical change from pre-recession times. Not that long ago, distributor managers were able to understand and predict future business trends in the subsequent six, eight or maybe 10 months approaching - in their heads. That intuitive skill seems to have gone away.

Without some well-thought-out tool, today’s distributors are lucky to predict next month’s levels. Good months are followed by dismal months with little or no warning. Economists call this a saw-tooth recovery – distributors and other small businesses call it nerve-racking.

In the current conditions, forecasting and planning must be “kicked up a notch.” Distributors who lack these tools find themselves at a major competitive disadvantage. All the industry experience in the world won’t help you. Plus, if you rely on your sales team for data points, and they don’t operate under a process, you may be doubly jinxed.

Because they lacked a process (a real documented process with definitions and measures of success), many distributors waited too long into the past business downturn before streamlining their operations. Similarly, many will wait too late in the upturn before spreading their wings into full expansion.

So what do you need for forecasting?
Regular review and a well-thought-out update procedure are a good start. The forecast will never be perfect— but just a couple of slight changes can add a whole new measure of confidence.

Lots of distributors go through some type of annual sales planning. Sometimes driven by their manufacturing partners, other times pushed forward by progressive marketing groups (like Affiliated Distributors), these companies assemble a once-a-year “guestiment” of future sales.

Whether they refer to it as a sales plan, budget or forecast, most derive it from data the sales groups provide. We ask salespeople to provide their “best guess” of business levels for the following year and rollup this information into branch, region or company reports.