by Richard Lloyd Evans

Created on: February 11, 2011   Last Updated: February 12, 2011

Recessions hit businesses hard, especially where the organization is developing projects. There is no doubt that recessionary forces impact business projects, but they can also provide opportunities for businesses to improve their market standing. A recession can be a wake-up call to reinvent projects into a leaner, more nimble and beneficial future for the business. First, let’s look at how recessions effect business projects before we look at the opportunities that a business can find.

 The impact on a business is normally profound. Customers and clients become defensive and conservative and buy less. When they are buying the customers are looking for lower priced or better value choices than before. Revenues drop, profitability suffers and often turns to losses. Financing becomes tighter so funding projects quickly become an issue.

 Business managers tend to develop a “bunker mentality” at the falling revenues where cost cutting is key. Projects are cut or canceled, advertising and research and development are cut and soon these are painful. This approach is needed to some extent, but willy-nilly cutting can be more damaging than the recession itself.

 In good times it is easy to be successful, since cash is flowing freely and normally poor or borderline projects are encouraged because there is little downside and immense upside. These factors tend to encourage waste and productivity suffers.

 A recession brings all of this up short. Investor extraordinaire Warren Buffet has written that a recession is like being at the beach: when the tide goes out you see who is not wearing any bathing suits. But worse, when business people find they are caught short in the shock and horror of a recession, managers forget that it is simply a market change. A market change is simply an opportunity for the wise person who can react. In business the one that can react not only to the dangers but also the opportunities of the new market conditions will thrive. In a recession a new market comes with clients who are more careful with their money, and are looking for better price and value. Business managers should therefore look at their own business and their business projects with those ideas in mind.

 Borderline, wasteful and unprofitable projects should be cut. However efficient projects that improve the market position, profitability and efficiency of a company should be emphasized. It is easy to forget that recessions are temporary. There will be another growth cycle ahead and a business needs to make sure they will have the technology and tools to succeed at the next market change.

 Two areas that fit this mold are marketing and R&D. In good times these areas can become bloated and wasteful. When a recession hits they are also the first to get cut, but cuts should be wisely done. Marketing and R&D projects drive business performance today and tomorrow. Wasteful and inefficient projects should be cut. However refocusing projects and targeting them more on market realities provide greater long-term returns.

 A recession has great impacts on a business and the projects they run. However a recession can also be a wake-up call to reinvent projects into a leaner, more nimble and beneficial future for the business.

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