Businesses need to plan for upside surprises almost as much as they plan for the downside. Although managers may say, “Bring on the sales,” they frequently are not ready for more business. Sales staff may have to be increased, production capacity increased, people with some hard-to-find technical skills hired. And then there’s the financial challenge: laying out cash for materials and labor before the customers send in their payments.
Good news really needs some planning.
Here are the steps:
1. Determine your vulnerability to economic swings. This works just like assessing your vulnerability to a recession, because most businesses are fairly symmetrical.
2. Develop an early warning system. The same one that you use to watch for a downturn works just fine for an upturn.
3. Sketch out a contingency plan for stronger sales. This step is different from the recession contingency plan, of course. What are all the things you’ll have to put in place to handle significantly improved sales.
4. Manage the business to get the flexibility to implement the contingency plan if necessary. That may mean adding room to expand the next time you renew a lease, or getting some key employees the training they need to step up to more responsibility.
Some of the steps you’ll take to prepare for an upturn directly contradict the steps you take to prepare for a downturn. That’s why you get paid the big bucks. The important thing is to give thought explicitly to the decisions you may have to make on both sides of the coin. Some steps that gain flexibility don’t cost too much; others you’ll agonize over. But the real value comes from thinking over your options well in advance.