Prosperity in The Age of Decline: How to Lead Your Business and Preserve Wealth Through the Coming Business Cycles

Chapter 9Offense and DefenseStrategies for the Upside of the Business Cycle

Offense and Defense

Knowing how to play offense and defense means that you can see business cycle rising trends before they occur—and can therefore get aggressive with your plans, pricing, and budgets (offense). You'll also be able to catch the weak spots of business cycle declining trends and protect your profitability, even though the economy will be going through leaner times (defense).

The business cycle consists of four Phases: A, B, C, and D.

During Phase A, the business cycle is advancing, the economy's momentum is on the upswing, and data that showed that the economy had been in recession is starting to turn in a positive direction. Figure 9.1 illustrates Phase A.

Figure 9.1 Phase A: 12/12 Rate-of-Change Is Rising toward the Zero Line

Source: ITR Economics.

Companies can rely on two historically verifiable measures to spot this change and be confident that the business cycle is actually improving:

1. The majority of the leading indicators in the system that the company depends upon are moving up; and
2. The company's 12/12 rate-of-change, which measures the business's growth for 12 consecutive months, is rising.

Conflicting Messages

Early Phase A can be a confusing time. Although the economy shows encouraging signs, most decision makers are still pessimistic, fearful, and uncertain. Because ...