How to Know If Your Business Could Survive a Downturn

Carla found out on a Tuesday that her best crew lead was moving to North Carolina. She hung up, sat in her truck outside a job site, and did the math she had already done twice in five years. Who knows what he knows? And what will it cost me while I find out?

She had been here before. That was the part that scared her.

Three Hits in Five Years

Carla runs a commercial landscaping company in South Florida. The first hit came from the county. It banned fertilizer applications for the whole rainy season, from mid-May through October. It was a reasonable rule for the water. It also wiped out more than five months a year of the fertilizing work that carried her best margins, and she heard about it from a competitor at the supply house.

Two years later her largest client, a developer who kept her crews busy across a dozen properties, stopped breaking ground when borrowing got expensive. The work dried up over two quarters, and she laid off people she had trained herself.

Then came the call about her crew lead.

Carla recovered every time. Every time it cost her a year of growth and a good part of her savings.

The Question She Couldn't Answer

When she called me, she asked how to keep this from happening again. I asked her something else: on a scale of one to ten, how ready is your company for the next hit, whatever it turns out to be?

She said seven. Then she laughed, because she had said seven before each of the last three.

Her gut was right about the business she could see. Every hit had come from a place she wasn't looking.

A Gauge Instead of a Gut Feeling

On long patrols in the Navy, my crew never knew which engine might fail. We did know exactly how ready we were if one did, because we checked against the same list before every flight. Carla needed that for her company, and for herself.

So we built her a gauge. Every quarter she scores the business against thirty-five plain statements across seven areas: leadership, technology, people, customers and vendors, the balance sheet, revenue and expenses. Each statement gets a 0, a 1 or a 2. Do you know your breakeven point? Can at least two people do every critical task? Would losing your biggest customer sink you?

Part of the gauge is personal. It asks what the owner is prepared to give up in a bad year, in money and in time, and how she will lead by example when she does. Carla had never written that down. Her first answer was "whatever it takes." By the end of the hour it was a number and a date.

Her first score was 31 out of 70. The lowest areas sat exactly where the hits had landed.

Two habits turned the score into something she could use. Her leadership team scored the same statements on their own, and we spent our time wherever her 2 met their 0. And she worked only the three lowest items at a time, each with an owner, a due date, a first step and the name of the person whose help it would need.

What Ready Looks Like

A year later a key supplier raised prices sharply with almost no warning. Carla knew her breakeven and which expenses could go, and her team knew who covered which job. She made her decisions inside a week, and nobody lost their job.

Her score that quarter was 52. There is still room to climb, and she knows exactly where.

Do This Monday

You can't predict your next hit either. You can measure how ready you are for it. The Downturn Readiness Assessment is the same gauge Carla uses: thirty-five statements, about ten minutes, and a wheel that shows where you are exposed and which three items to work first. It is a Pinnacle Business Guides™ tool, via Apogee.

Take it yourself, then have your leadership team take it. The gap between your answers is where the next hit lands.