How to Prosper Despite the Coming Economic Challenge

This article is a reprint of Wise Bread's contribution to OPEN Forum from American Express -- where small business owners can get advice from experts and share tips with each other.

Advertiser Disclosure ▾

This page contains affiliate links from which we receive a compensation. Like many publications Wise Bread is supported by affiliate commission from partner companies whose products appear on our site. This may influence which products we write about and the location and order in which products appear. We aren't able to cover every product in the marketplace.

Wise Bread Picks

• Travel Rewards Credit Cards
• Cash Back Credit Cards
• 0% Balance Transfer Credit Cards

Many economies face difficult times in 2012. But your fate does not have to be directly correlated to any of them. By continuing to solve problems for your customers and by adding more value than they will ever expend on your product or services, you can make your business a contrarian, and likely part of the reason world economies can have any hope of recovery!

At a recent conference The Economist’s Economic Editor Zanny Minton-Beddoes discussed the state of the world economy. She warned her comments would not paint a very rosy picture, yet I will argue there is still so much opportunity for businesses to grow and succeed.

Here are four issues Zanny suggested will carry into 2012 followed by my thoughts on how you can navigate around, over, or even through them to achieve success.

1. US Debt to GDP Exceeds 100 Percent

The United States continues to creep closer to insolvency than financial health. For the first time since 1947, the United States’ Debt to GDP exceeded 100 percent. That means the total gross economic value America can produce in a year will no longer cover the entire debt load to which this country is obligated. Normal businesses would be bankrupt before they even reached 50 percent debt to annual inflows.

2. Mortgage Debt Overhang

Thanks to recent declines in real estate values and over-aggressive lending practices, over 20 percent of households in the United States owe more on their homes than they are worth. It used to be worse, but this will continue to be a drag on many industries and the economy as a whole for years to come.

3. Political Paralysis

Nothing is more frustrating about America’s struggling economy than the inability of its government to get anything meaningful or productive done to improve the situation. While each party seems content to align themselves on the far ends of the politicalspectrum, they have forsaken the political middle ground where progress and improvement needs to happen. With a big election year ahead, the stalemate seems destined to continue into 2012.

4. Europe Has Its Own Challenges to Overcome

If you think the United States’ debt to GDP is bad, consider the insolvent country of Greece at over 145 percent. So long as the European Union is at risk with Greece, Italy, and potentially others, America’s capital and debt markets, and, consequently, its economy, will still struggle, despite an arguably faux increase in the value of the dollar.

How to Prosper Anyway

Before you get too overwhelmed with these problems, there is still a long list of companies that are succeeding anyway. How? They recognize these economic issues are generally outside of their control and influence, and they charge forward in spite of what they hear in the mainstream media and from other business owners who continue to blame the economy for their problems. Here are some suggestions to make sure you’re included among the companies that thrived despite the macro-economic woes.

1. Put Your Head Down and Go to Work

As simple as this may sound, it really works. Turn off the news, shut-out the doom-and-gloom, and focus on what you can actually control. Find new markets for your existing products. Develop innovative products and services. Get a grasp of the key performance drivers of your business and train your thoughts and actions to improve those metrics.

2. Micro-Manage Your Cash Flow

Your business needs cash like your body needs blood. Businesses that thrive in tough economies know their cash flow and keep a close eye on every inflow and outflow. They charge the right prices and collect money faster than competitors. They minimize all expenses, with an eye toward reducing waste, getting the best prices without sacrificing quality, and squeezing as much value as possible from every dollar spent.

3. Look to Emerging Markets

With many of the developed countries and economies flat or even contracting, most large companies are targeting emerging countries as their best prospects for growth. So should you.

4. Consider Buying another Business

Just as real estate values are down, business values are also coming down. If you’ve considered buying a competitor, merging one of your vendors or suppliers into your existing business, or any other merger or acquisition strategy, this might be one of the best times to pursue such a course of action. If you can prove that such activity will pencil to profitable and sustainable growth, you’ll likely be able to find relatively inexpensive financing to help you with the transaction.