By Mike Southon, FT columnist

The recession is grinding towards its inevitable end game, with announcements of public sector redundancies, rising consumer prices and likely increases in interest rates to combat inflation.

While this particular crash is considerably deeper and longer lasting than previous ones, those of us who have been around the block several times know this is just the way of things.

In 1997 Gordon Brown made a bold assertion of “no more boom and bust” and despite his subsequent claim of actually having said “no more Tory boom and bust” it did seem too good to be true at the time. Recessions follow booms just as winter follows summer; the key is to be ready for it.

Recessions are always preceded by unnatural stock market activity inexplicable to ordinary people, who have a sneaking suspicion that insiders are manipulating the system to their own benefit. The next time this starts to happen, my advice would be to reduce your debt radically.

A sensible entrepreneur knows that cash is king, and while it is very tempting to take on debt in the good times to expand the business, this can backfire horribly when the banks suddenly change the rules.

Many of my good friends found their companies wound up by the banks when the recession began to bite two years ago. It could be argued that this is a good and natural part of Darwinian evolution, the survival of the fittest, especially for serial entrepreneurs who tend to be adept at bouncing back from adversity.

Those entrepreneurs who managed to survive the recession by a combination of good cash management and redoubled efforts in sales and marketing, are now painting an optimistic view of 2011/2, so long as the dreaded ‘double-dip’ does not actually happen.

But for those in the public sector, now is the time of voluntary and forced redundancies as local authorities take a long hard look at how to reduce costs while focusing on delivering key services.

For those with long service and a good redundancy package, this might represent a very welcome early retirement and the opportunity to pursue hobbies or become more involved in charities and social enterprises. Others tell me they will be receiving a year’s income, thus enabling them to take a long family holiday and then have a fundamental re-think about their career and long-term aspirations. There will even be a lucky few who leave their employment on a Friday only to return to exactly the same job as an external consultant on a significantly higher day rate.

But for those who are not in those fortunate positions it will be a time of uncertainty and self-doubt, with a pressing short-term requirement to generate income. My advice to these people is to ask their exit counsellors for as many psychometric tests as possible to understand their own strengths and weaknesses, and to determine whether they are more suited to working for someone else or becoming self-employed.

Required reading is Spencer Johnson’s Who Moved My Cheese, a simple parable about some mice that arrive one day to find their cheese is gone. Some wait for the cheese to return, while the more enterprising mice go and look for some other cheese.

Six months after redundancy many people will still be bitter and angry. Others will, in retrospect, admit it was the best thing that ever happened to them. My role in this difficult human drama is to show that becoming self-employed is not rocket science. It only requires a little confidence and the support of family and friends, who will probably also be your first customers.

Originally published in The Financial Times: www.ft.com
Copyright ©Mike Southon 2011. All Rights Reserved. Not to be
reproduced without permission in writing.

Mike Southon - Co-author of The Beermat Entrepreneur & Business Speaker - http://www.mikesouthon.com

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