There aren’t too many industries that have no market cycles. Some are more significant than others. Over time, as business grows and changes, some companies lose sight of the market, how they are positioned and their cost structure. As a result, erosion starts to occur in the profitability of the business.
This is the point when many companies are bought. But even if a sales transaction doesn’t take place, it’s time to put some tension back into the business. Why? Because the market always turns at some point and if not addressed, the business may go out of business due to high fixed costs and lack of market insight.
What does this mean? With lack of market insight, the company will miss the market signals that indicate it is time to adjust the business as the market demand starts to drop. With a high cost structure, the company may not have enough time to adjust before it runs out of cash. Thus becoming another company that doesn’t make it through a market cycle.
This is where it is critical to have a focused management team that has a strong sense of urgency. You never know when the market is going to turn, so acting with a sense of urgency as if the market turn is today or tomorrow, will position the company well for when it actually does turn. How are you positioning your company for market turns?