Summary: Can I tell a story about a strong economy? You bet I can. Do I believe it? Not really, but I’ve been forecasting the economy for 30 years, and that experience has made me . . . humble. So although I’m not forecasting a strong economy, I recognize that I just might be wrong.

I’m Dr. Bill Conerly. I connect the dots between economics and business. Welcome to the fifth and final video in the series Business Planning with Risk of Recession. So far we’ve been all about doom and gloom, explaining how to run your business anticipating light to moderate economic growth, while also protecting yourself against the risk of recession. Today you’ll learn how to incorporate the possibility of a stronger economy into your planning.

So what’s that story about a stronger economy? First, money supply growth, which I think is very important. The Federal Reserve’s quantitative easing will, in fact, help the economy, but with a long time lag.

How much help does the economy need? Consider manufacturing production. If we could string together six months or so of strong growth, then factories would need to expand their productive capacity, something they haven’t needed to do for several years. That will increase demand for equipment, leading to more jobs, more consumer spending, and off we go. Let me remind you that this is NOT my best estimate of where the economy is going, but it certainly is a possible direction that business leaders should be prepared for. So let’s develop that stronger economy contingency plan.

Running a growing business is more fun than running a shrinking business, but it’s not all beer and skittles. Growth can be very stressful. Let’s look at some issues:

Sales: in sluggish times, sales people get discouraged. When the economy turns up, the new orders are won not by discouraged salespeople, but by folks too young or too stupid to know that they can’t make a sale. So you, the business leader, need to make sure your sales people are energized.

Working capital gets stressed by growth. You may have to lay out cash for wages and raw materials long before you get paid by your customers. Your accountant will tell you that you’re making money hand over fist on an accrual basis, but that you have run out of cash in the bank.

Production: can you actually produce what you need? Is your equipment ready for increased output?

Vendors: Can your vendors deliver the materials you need? Really? Have you checked with someone other than their sales guy?

Staffing: do you have the people you need to produce more goods or services? If not, where will you find those people?

All of these issues can be addressed now, without much expense. For instance, it’s not hard to identify and stay in touch with people you might want to hire. It’s not hard to check with your vendors about their capacity to increase deliveries. Have those conversations now, just in case the economy turns up.

Now let’s talk strategy. A few years ago the folks at McKinsey analyzed corporate strategy over the business cycle, with surprising results: The worst-performing companies used the boom to expand, acquiring other companies and taking on debt. Then in the downturn, they sold divisions and struggled to pay down their debts. Those were the worst-performing companies.

The best companies did the opposite: they used the boom build financial strength. They paid down debt and resisted the temptation to expand. Then in the downturn, they used their financial strength to buy weak competitors. That’s what you want to do.