Depending on the latest news headlines and economic reports, it's one's best guess as to when the recession will end. However, there are fundamental indicators that can provide hints to help business owners anticipate the impending shift in the market cycle from recession to recovery and plan for the future.
As an active participant in regional economic diversification efforts, the Economic Development Authority of Western Nevada experiences market cycles first hand as we assist companies from diverse industries make decisions about locating or expanding in Greater Reno-Tahoe. Key to assisting a company with its decision is demonstrating that we understand each company's industry, risk tolerance, near-term needs such as available product and inventory, and longer-term strategic needs, such as capital expenditures on equipment or a new building.
We are not economists, but as economic developers we closely monitor economic indicators that will help us glean insight into a potential market shift, which helps us better understand the needs of companies considering relocation. Leading economic indicators are designed to forecast changes in business activity. These leading economic indicators can help a business manager anticipate a change in an economic cycle so he or she can prepare for change. Increased production and inventory are two indicators that can signal a shift from recession to recovery may be occurring. At EDAWN, we've seen a recent uptick in manufacturing and distribution companies expressing interest in increasing production and expand warehousing space in our market. We have antidotal confirmation from local brokers that they are experiencing a similar increase. This is not a trend yet, but we see reason for cautious optimism.
Conversely, some economic indicators are lagging, meaning you won't see a change until a few quarters after the economy cycles through. Unemployment is one of the last indicators to improve during an economic turnaround. The Economic Cycle Research Institute, a New York-based independent forecasting group, recently forecast that the U.S. recession will end sometime this summer. If Greater Reno-Tahoe follows the United States, then we could be looking at a declining unemployment rate next summer.
What does all this mean to local business owners and those outside our market who might be considering relocating or expanding? According to economist Dr. Peter Navarro, professor of economics and public policy at the Paul Merage School of Business at the University of California, Irvine, who writes in "Recession Proofing Your Organization" and "The Well-Timed Strategy," there are a few key areas to focus on that will help position your company for growth when the shift from recession to recovery occurs:
Business-cycle forecasting - Use financial data that's available to you to stay current on quarterly trends that may impact your business. A variety of groups and publications collect and report economic indicators of how the economy is performing and likely to perform in the future. Put that data to use!
Business-cycle strategies - Leadership teams must learn to understand business cycles and implement a set of management strategies in response to the forecasting data. This may hedge against economic downturns and increase competiveness.
Human resources - Protect your skilled workforce and "cherry pick" the talent pool in anticipation of a recovery.
Capital expenditures - Increase capital expenditures during the recession to develop innovative products and new capacity in time for the recovery.
Production and inventory control - Manage your production and inventory turnover in anticipation of a recovery so you have ample supply to meet your customer demand and increase market share when the time is right.
Marketing and pricing - Increase your marketing budget in anticipation of a recovery to increase market share, build brand, retarget customers and adjust message to fit the market cycle.
In the past 12 months, EDAWN has seen evidence of companies preparing for the recovery cycle. Company inquires are up approximately 40 percent from the same time last year. Most of the companies are looking at bottom-line criteria, such as taxes, regulation, and payroll costs, to determine if our region is the best place for them to expand and invest.
While we're seeing more companies do their due diligence now so they're in a better position to move quickly once the market turns, companies are still taking a more wait-and-see approach to relocating or expanding their business. EDAWN and our regional partners are on the offensive to try to speed up their decision-making timeline. We've formed a collaborative marketing task force including a mix of regional businesspeople from commercial real estate, utility, construction, healthcare, business and financial services and sales and marketing to launch a marketing communications program targeting companies in California and other feeder markets.
The goal with the campaign is to demonstrate to company owners who may be on the fence about where and when to relocate or expand their company that Greater Reno-Tahoe is a competitive place to do business that will improve their bottom line. Doing business in Reno-Tahoe is just good business. Part of that message is changing the perception that many still have that Reno-Tahoe is a gaming-tourism only destination with little to offer companies or skilled professionals. If you know of a company who might be thinking about moving or expanding its operation, please let us know so we can introduce them to our region and reasons for doing business here.
Tina Iftiger is director of business development at the Economic Development Authority of Western Nevada. Contact her at iftiger@edawn.org.
