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Rick Telberg
Rick Telberg
 

Three Questions Before It’s Too Late

When does prudence become “recklessly cautious?” Find out how CPAs are managing the recession. Join the survey; see the results.

June 1, 2009
by Rick Telberg/At Large

If you’re hunkered down, cutting budgets and focused on merely preserving old business, you may be missing one of the greatest investment opportunities in a lifetime, according to some widely followed analysts.

This may be the time to strike with important new growth initiatives or even with a new merger or acquisition. When values and prices are this low — in a whole range of categories from equities and real estate to labor and technology — what’s the downside risk? I’ve been hearing from a lot of savvy CPAs over the past few weeks that this is, as one said, “a great time to be buying.” Buying what? I asked. He said, “Anything … and everything!”

Find out how CPAs are handling the recession.

Sound off here; see what other CPAs are saying.

(Free. Confidential)

Now comes a team of McKinsey & Co. researchers who have fleshed out the CPA’s nose for value with some historical economic data. Writing in the McKinsey Quarterly, partners Richard Dobbs and Timothy M. Koller, say business planners need to look past the recession toward the next stage of the world economy, or they could risk losing out for another generation.

“Much uncertainty surrounds the timing of the downturn’s end,” they write, “but companies waiting for clear evidence of a turnaround may find that they have been recklessly cautious and missed once-in-a-generation opportunities to acquire or invest.”

So if you’re in the C-suite, or merely looking in on it, consider a few questions — these gleaned from Dobbs and two other McKinsey colleagues:

1. What are you telling your investors? If you don’t have a clear-eyed vision for taking advantage of the outlook, they may wonder about your long-term plans.

2. In addition to the upside of a recovery, do you understand the downside risk? “How well,” McKinsey asks, for instance, “do you understand your company’s exposure to major currency or commodity price movements? Do you know whether the health of channels, customers or suppliers might create substantial structural change or whether your company is prepared to deal with high levels of volatility that may continue even as a recovery builds?”

3. How are you taking advantage of today’s buyer’s markets? Struggling employers are cutting head counts, marketing, training, research and development, new products and capital spending. “But all of these,” McKinsey says, “now cost less than they have in a decade, especially hiring new finance professionals.”

Research shows time and again that the companies which can afford to maintain spending in talent, marketing, R&D and capital investment during a downturn tend to prosper in the next cycle.

Economists seem to be coming to a consensus that the recession could end as early as later this year. To be sure, global business conditions may never replicate those of the last few years. But can you, your firm or company, afford to miss this opportunity?

POLL: Find out how CPAs are managing through the recession. Join the survey; see the results.

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Copyright © 2009 CPA Trendlines/BSG LLC. All Rights Reserved. Used by Permission. First published by the AICPA.

About Rick Telberg

Rick Telberg is editor at large/director of online content.

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Disclaimer: Any views expressed in this article do not necessarily reflect the views of the AICPA or CPA2Biz. Official AICPA positions are determined through certain specific committee procedures, due process and deliberation.