Why You Need To Prepare For Abrupt Market Changes Even When Business Is Booming

Even when business is booming, entrepreneurs should plan for abrupt market changes.

Recently I stumbled over a 4 year old post from my Inc. magazine column that reminded me of how many entrepreneurs don’t give enough thought to how their business will react to abrupt market changes. This is especially true when business is going well. But there are big dangers with failing to prepare for the worst. We saw this with the dot-com bubble, and we could be seeing it again now with what many are viewing as the next tech bubble. The key question to ask yourself is, “How will my company respond to an abrupt market change?”

When Market Conditions Abruptly Shift

In my article I used the drop in oil prices to illustrate the need to have a plan. In mid 2014 the price of oil plummeted from $100 per barrel to closer to $50. That’s an abrupt market change by anyone’s definition, and the effects rippled through the industry all the way to some hotels that I owned in an oil producing region of North Dakota. Oil companies scaled back operations in the region, and the demand for hotel rooms nosedived. I hadn’t foreseen the disruption, but like any company built on solid foundations, we responded to the change by:

  • lowering prices and marketing aggressively.
  • fostering deals with oil companies and targeting the workers in the field.
  • transforming from some of the more expensive hotels to being low cost providers.

To put it plainly, we adapted.

Prepare For The Worst – Even When Business Is Great

“What’s going on now in technology doesn’t look to me like the dot-com bubble we saw in the late 1990s. That said, valuations are high, and it won’t surprise me if they plunge at some point.”

When that plunge happens, it’s guaranteed to have a ripple effect across numerous industries. If your company is anywhere near the potential fallout, then you should give some thought to how you’ll react to guide your company through the storm. The key is to understand that market conditions can change – suddenly and drastically. Obviously there are limits on what you can do in advance, but knowing your options and having a rough plan will ensure that you’re ready for when those changes land.

Read my article in its original form at Inc. Magazine’s website.

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