Borrow your crystal ball, buddy?

Last Friday, ed-tech sage Nelson Heller published comments, from me and others, on the subject “Navigating the Downturn: Are We There Yet?”  I said, essentially, no.  The “end” of the recession just meant the economy stopped getting worse, but it stayed real bad, and it will take a while before it gets a lot better.  And it will be even longer before any improvement really helps education funding.

How confident am I that I’m right?  Well, let’s say 95%.  Which means, statistically speaking, that if we lived through this year 100 times, 95 of those times I’d be right and 5 of those times I’d be wrong.

What, you have a problem with that logic?  It’s the same way the meteorologists base their forecasts!  It’s the way life insurance premiums are calculated!  Sadly, it’s not very useful – because unless you’re Bill Murray in Groundhog Day, you only get to go around a particular time frame once.  And the one, single future each of us gets might be one of the 95 in which funding is really horrible, or one of the 5 in which it’s not.

There’s still more bad news about fortune-telling.  Even knowing what’s going to happen doesn’t necessarily tell you what to do about it.  (How do you react to the highway signs “Look out for falling rocks”?)  Suppose funding is flaccid as I’m predicting.  Suppose school product spending falls 20% this year.  Does that mean you should immediately take 20% off your normal revenue projection, slash 20% of your advertising budget, fire 20% of your staff?

Heck, no…particularly the last two.  I could make an argument you may want to increase your advertising budget at least a little; at least, make sure you’re not passing up good opportunities to communicate with your best customers.  As to your staff, assuming you’ve been prudently managing overhead so far, they may be your best resource for continued survival.

Market condition is only one of the factors that determine company outcomes.  Unless your company is so huge that it resembles a “statistical universe” – like an index fund is supposed to be, where all the small variables cancel each other out and all that’s left is the macro trend – you have almost as many opportunities to score successes in overall rotten conditions as you did to generate failures in good times.

Based on the half-dozen or so recessions I’ve lived through, I’d say they’re like Dr Johnson’s comment about impending hanging: they concentrate the mind wonderfully.  They demand that you scrutinize each piece of what you’re doing: each price, lead cost, sales closing ratio, positioning statement, product, service.   You shouldn’t expect that each piece will be perfect – because your crystal ball isn’t any better than mine – but at least that it’s as good as you can reasonably expect.  And that there’s enough diversity among your different sources of sales that strength in one area can help offset weakness in another.  (If you don’t have any diverse sources of revenue – that may be a place to make some judicious investment.  Don’t think “now is not the time” – because “now” is likely to last a couple more years.)

Fact is, we never really know what’s coming.  Anyone who’s read The Black Swan should have that well in mind.  But keep in mind, too, that there are still white swans.  It’s just important that we look closely enough to tell the difference.

Mike Baum
Sophia Consulting LLC

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About mhbaumk12

Mike Baum has 40 years of experience with all types of direct marketing, has run several companies, spent 25 years as a consultant in franchising and in K-12 education, and currently helps companies find solutions to growth challenges.
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