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How Necessary Cutbacks Can Lead to Growth

You’ve heard the phrases repeated over and over again like mantras; bad economy. Tight budget. Business is slow. Even UPS, the world’s largest package delivery company and recognizable icon of industrious business everywhere is acknowledging the severity of the situation and projecting continued sluggish growth for the global economy. In reaction, the company is cutting back on its capacities, including sending fewer cargo flights around the world, and simultaneously lowing its projections for the remainder of the year. With expectations that the company’s third-quarter earnings will ultimately come up well short of last year’s numbers, other business leaders are feeling the pressure.

It’s not anything in particular that UPS is doing wrong, FedEx, its largest and most rival competitor recently predicted that its own earnings would suffer in similar fashion, and countless other companies are thinking and acting conservatively as well. Doing business in 2012 has undoubtedly become a trickier proposition. The general perception is that there is not much that can be done, but it isn’t entirely impossible to operate or even start up a successful business amidst the challenges of a struggling economy.

This is now the 3rd consecutive year in which the mid-year economic outlook has stalled out after a promising start. There is little reason to think that the end of 2012 will be much different, especially considering the special circumstances of the upcoming US Presidential election. Truth be told, not much about the environment is changing. Yes, in the bigger picture, 2012 may be a less desirable time to run a company than 1998, but the circumstances and attitudes are hardly any different from how they were in 2010, or how they will likely be in 2014.

Many companies will not feel ready to stop just ‘weathering the storm’ and get back to business until the persistent uncertainties of the past few years are cleared up. In the interim, businesses with the real goods will not only persevere, but thrive, because spending more resources isn’t the only way to build more business. Companies who are willing to step back, scrutinize every aspect of their situation, and then adapt strategy accordingly will find that periods of recession are a time to learn how to operate smarter.

UPS’ forecasting appears accurate, and their action appropriate, but it is important to recognize that as the company cut back services to conserve resources, it increased revenue and became more profitable. The realities of the economy aren’t going anywhere, but with the right approach, the time to build your business is always now.

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