Stage II:
The Contraction Stage

Most economists suggest that the economy is in economic contraction when a country’s economy suffers two or more quarters of economic decline. We use this same definition and apply it to a business. So, if a business has declining business indicators (e.g. net profit, debt to equity, sales, etc.) for at least two quarters it maybe in contraction.

3 Indicators of Contraction

1. Declining Net Profit 
   same concept as in stagnation. PS – cashflow is not profit! Get more details in our course or webinar.
2. Increasing Cash flow with debt 
   Of course, there are the obvious forms of debt: loans, line of credit, a loan from your rich uncle or from your Mom!
3. Losing your best and brightest
   Your best and brightest staff have options. Their experience and expertise make them very marketable and the minute they sense that your business might have some survival challenges they begin testing the market.

If you have lost key staff and up and coming stars in your organization over the last 6 – 9 months you may be in Stage II – Contraction. One way to quantify this is if you have an attrition rate of 20% or more over 6 – 9 months then you more than likely are in a Stage II of a dying business.

Be sure to contact our Business Analysts &Strategists for assistance in calculating your attrition rate.

Even if you are a company of 1, you can still experience losing the best and brightest syndrome.

Here’s how:

1. Contractors, vendors and people you do business with begin to distance themselves from your business. Contractors begin to get tired of having to wait too long to get paid so they are not as anxious to provide servicesto your business.
2. You begin to lose yourself. After all you are the best & brightest in your company when you are the only one in your company. So how can you lose yourself?

When you begin to start looking for part time work or other contracts that are not within yourbusiness model, and you do this simply because “you need the money”.

I personally experienced this several times early on in my business. Just to pay the bills at home, I had to become a “part time entrepreneur” and a “part time accountant”.

You can experience “self-attrition” as a business owner / CEO when you experience burn out. Burn out results in you getting declining productivity from yourself. When this happens you are losing yourself or losing the productivity of the most important person in your company – YOU!.

As your productivity contracts or declines your business is in Stage II of Dying – it is in the Contraction Stage.

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