When the growing gets tough

Business is all about growth. If you don’t believe me, read any of the great economists, from Karl Marx to J.M Keynes, Joseph Schumpeter or Milton Friedman. Whether they are monetarists or political theorists, whether they concentrate on demand or supply, they all end up believing in some kind of business cycle.

We may not be in great shape at the moment, but things will get better. This is not mere reckless optimism, but observation based on experience. The business cycle moves from expansion to contraction and back again – almost like breathing. You can’t have one without the other.

It was always thus. Yet it’s extraordinary how timid people are when times are tough. Yes, we’re in some kind of a recession, whether people choose to call it that or not. Recovery may take a while. But so what? We’ve had recessions before, and we’ll have them again.

We are where we are, and as far as I’m concerned, the only question worth asking is how we set about growing again. And I’m convinced there’s no time like the present.

Aim high. Take a look at Warren Buffett, the most successful investor of all time, the man who presciently described derivatives as “financial weapons of mass destruction”, who helped to bail out Goldman Sachs when Wall Street was in full panic mode, who can be relied upon to talk common sense when others are behaving like headless chickens.

What is Warren Buffett doing right now? He is buying stocks. That’s right. He is getting busy because he knows that there’s value out there, and if he buys the right stocks at the right prices, he and his investors will be sitting pretty in a few years’ time.

It’s the same for entrepreneurs and businesses of all sizes. Now is the time to lay the foundations for growth. There has never been a better opportunity to strike bargains with suppliers. Everyone is desperate for business, so this is the moment to invest in the things you need – and your supply chain is one of the keys to long-term growth.

This is also the moment to look for new markets. If you have capital, put it to work now. Invest in expansion. Take risks. This doesn’t mean taking on more debt than you can afford. But if you do have to borrow money, there may never be a better time than now. Interest rates are low. Governments are desperate for growth and willing to hand out grants in the right circumstances.

You’ll still have to do most of the work yourself. Look around you. Where is the greatest scope for expansion? It might be in the public sector, or it might be the private sector. In the US, for instance, while overall growth was falling in 2010, there was a 33% growth in the number of firms working in government services. Many of these were in Washington DC, or in Virginia or Maryland, within easy reach of the capital; many were in IT, or in some way related to the military – hardly surprising considering US commitments overseas.

Across the Atlantic, much of the UK public sector has fallen victim to spending cuts, but the government is about to remove planning restrictions in a way that is sure to create opportunities in the long-depressed construction business. Meanwhile, the spirit of private enterprise lives on – to such an extent that more than 200,000 new businesses were launched in the first half of 2010, the largest number in any year this century.

Every sector is different, and so is every continent and every country. In South America, service industries are proliferating rapidly, from insurance and other traditional financial services to more IT-based services like customer relationship management. In Asia, where success has often sprung from the use of plentiful local labour to deliver established products and services, the new challenge is to create entirely new categories of products and services to cater for a rapidly expanding and highly educated middle-class clientele.

But what works in Brazil may not work in Chile. And your clients in Shanghai may have quite different priorities from those in Delhi.

Business leaders need to keep themselves informed. You need to know what governments are doing, what people are doing, what the prevailing culture will permit, what is changing and how. Above all, you need to be aware of your surroundings and willing to try things out.

For the brave leader or entrepreneur, it would be hard to find a more exciting part of the world right now then the Middle East. In the wake of the Arab Spring, a new elite is emerging, often well educated, entrepreneurial and longing to make up for their years of repression. It’s early days, of course. If you want to do business in Egypt or Libya, you need to know which way the wind is blowing. You would probably be well advised to work in partnership with someone who really knows the region, the politics and the culture. But if you can get a foothold now, if you can connect with the decision-makers of the future, the rewards could be enormous.

Wherever you go, you’ve got to do the research and make the connections. And don’t be afraid. If you want to make it big, you have to grow. It’s when the growing gets tough that the tough get growing.