There are 4 specific steps to turnaround a company in trouble. They are:
Step 1 - Raise Cash
Step 2 - Raise Prices
Step 3 - Discontinue unprofitable products / product lines
Step 4 - Cut Costs
The concept is to take the necessary steps to help a company survive troubled times.
Let's contrast this with the steps the government has taken during the recession:
Step 1 - Spend Cash
Step 2 - Raise Taxes
Step 3 - Create unprofitable programs
Step 4 - Increase expenditures
It is a little easier to see the contrast when you line up the two methodologies next to one another:
Step 1 - Businesses are conserving cash - the government is spending (Whose money are they spending? The taxpayers money.)
Step 2 - Businesses are having difficulty with current prices - let alone increasing prices. However, as a result of all the spending, the government will have no choice but to increase or raise taxes.
Step 3 - Businesses jetison unprofitable products or divisions. The government protects the Status Quo and promotes waste and ineffeciencies.
Step 4 - Businesses cut expenses - the government increases expenditures.
Now, I understand the role that the government is trying to play. There is a significant reduction in spending and they are trying to take up the slack. This might work if they actually had the resources to pay for it. Unfortunately, government spending will have to come back out of the taxpayers. This is the old rob Peter to pay Paul scenario. The problem is, Peter is out of cash too! I am afraid that this ends like a game of musical chairs - are you sitting down?
Copyright 2009 - Jim Lindell