Business survival in an uncertain economy.

On September 11, 2001, our world was changed forever. There's no longer a feeling of safety in this country, and this realify will undoubtedly have a profound effect on all aspects of the American public's lives. Once confidence in the future is uncertain and safety is questioned, people tend to respond in ways that create and maintain a downward economic spiral. The World Trade Center was a visible symbol of American capitalism and the Pentagon a symbol of our military might. They were attacked with America's own aircraft, using its own fuel as bombs arid killing its own people.

This could not have happened at a worse time because the world was already confronted with an unhealthy economic situation. Before this horrible event occurred, financial systems around the world were crumbling. While America hoped to prevent a recession with a seventh cut in interest rates, a number of economies were already shrinking including Brazil, Japan, Taiwan and Mexico. And in the euro-areas, GDP slowed to a virtual standstill. The unemployment rate in the United States increased to nearly five percent. For the first time in over a decade, the GDP of the wealthiest countries actually declined. The fact is: America and the world were on the verge of a recession before September 11, 2001.

The national and global impact

It is a safe assumption that the GDP in our country will fall in the third quarter of 2002, and probably beyond. Of course, the impact is and will continue to be severe on air travel, hospitality and the financial community for some time to come. If the price of oil increases, that will further exacerbate the situation. The government will ignore the issue of shrinking surpluses and significantly increase spending, particularly in the areas of defense and home security. While these industries are the obvious beneficiaries, retail, commercial airlines and travel have been and may continue to be hit very hard.

The direct impact of the attacks will be partially offset by additional spending on defense, security and rebuilding. Yet, while America has the vitality to rebound, it will never forget this event. "Remember New York" will undoubtedly remain a battle cry for many years, similar to "Remember Pearl Harbor." As new industries emerge from the ashes, others will deteriorate. Before September 11th, there was hope that America could avoid a recession based on significant consumer spending; but the attack in New York has changed all of that. During the Gulf War, when America was also about to enter into a recession, consumer spending fell for six months at an annual rate of close to three percent. It will be greater and longer this time. The fall in the value of stocks by some $1 trillion in the first week following the attacks made Americans feel more vulnerable, which, along with feeling less secure, is obviously not the best environment for robust consumer spending.

This picture of doom and gloom may also be mitigated by selected historical facts that should give cause for hope in the economic arena. There is no doubt that The Great Depression was eased by World War II, and the last great bull market began with the Gulf War. Money is being pumped into the economy, interest rates are being cut, and massive government spending has already begun.

Lessons to learn

Because of world social, political and economic events, the business community must learn how to survive during an extended period of uncertainty. Some companies will thrive while others that don't take proper action will fall. Certain survivors have already missed the opportunity to establish a new foundation for growth, expansion and maximization of the value of their business in the near future, and others are struggling with the New Economy. Few industries are immune to some level of change, which is why it is strongly advised to keep these lessons in mind:

Be creative and think out of the box. Disasters can become opportunities for positive change, personal and business growth and learning.

Develop a contingency plan. It is important to know the actions to take if business declines by 30 percent or even 50 percent. Ask the tough questions, and document the answers.

Understand bankruptcy. Many times companies rush into this option when it is unnecessary. Determine when bankruptcy can be avoided by seeking out the expertise of professionals.

Redesign and communicate the new business model. Demonstrate viability in the face of the crisis and give stakeholders a sense of comfort regarding the future direction of the company.

Give short-term preference to the balance sheet. Focus on the management of assets and liabilities. Install and alarm reporting system to make certain the migration toward cash is maximized.

Maintain close personal contact with key sources. Communicate. Communicate. Communicate. It's important for vendors, customers, lenders and others to know and understand contingency and other plans in order to get the support companies in transition need.

Engage experienced professionals who have experience in this environment. In the New Economy, quick action is required. Quick action by professionals who are experts in their fields is even more important.

Maintain personal goals. It is important for leaders to see their businesses as part of a broader personal plan to ensure there is support from family, friends and key associates.

Avoid personal guarantees wherever possible. This complicates the negotiation process with secured lenders.

A time to rise above

While the world may have changed forever and an economic slowdown faces Americans for an indefinite period, companies aren't necessarily doomed for failure before the economy recovers. In fact, this can be viewed as a time to rise above simple survival and set the foundation for enormous growth and expansion, leading to maximization of a company's value. Establishing that foundation and surviving through the crisis period can only be achieved by following plans that include the steps outlined above. Companies with long-term track records have learned these secrets of surviving the inevitable downturns inherent in a capitalist system. The message is abundantly clear that now is the time for companies to get their economic houses in order.

Mr. Kibel is co-founder of Kibel Green Inc (KGI), specializing in saving distressed companies and creating value for companies at crossroads in their lifecycles. He received the National Award of Excellence from the President of the United States for the many contributions his books have made toward the economy. For further information, call 310-829-0255 (Santa Monica) or 949-852-0150 (Irvine), or visit their Web site at www.kginc.com