The economy is booming. Your phone is ringing. People are standing in line. Orders are stacked up and the operation is in full swing. But the way you are handling it just might be putting you in a situation you'll never recover from.

The average economic recovery is 4.6 years. This one has been expanding now for 8.3 years. But even if optimists like me think it will go on for while, we all need to answer this question, "Are we doing anything right now that could be setting us up for a big fall when the next downturn comes around?

You Just Might Not Be Wearing a Bathing Suit

This isn't about "preparing" for a recession. It's about changing a fundamental business strategy that is a cancer in your business. During the 2001 recession, Warren Buffet wrote in a Berkshire Hathaway annual report, "You only find out who is swimming naked when the tide goes out."

I had a landscaping company come give me a quote for $1,000 worth of sprinkler and lawn repair. They did some quick emergency work for which we overpaid them $100, but we both agreed that was just a down payment on the $1,000 job. He said he was "super-busy" and would get it done in 10-14 days. Then he disappeared and never returned phone calls. He found a bigger fish.

We repeated this with another landscape company with the same result. Do you think I'll refer these guys? They don't care - they've got all the business they need - right now.

We're renovating three bathrooms. The factory-fresh vanities showed up with massive issues - big paint chips, misaligned drawers, crushed corners, and braces not glued down. We reordered - no apology, no rush, they didn't even offer to bring the replacements to our house, but finally, grudgingly agreed to deliver. The second batch was worse than the first. Again, no apologies, no accommodation, just a reorder. Each reorder took longer to get than the original order.

They are clearly killing it right now - slinging so many cabinets out the door that if pieces fall off when you open the box like they did for us, it's not embarrassing or even a problem. We lost counter top guys because of delays, and were without bathrooms for a month.  They don't care if I refer them, either - they, too, have all the business they need - right now.

These guys and too many others are busy riding the economic wave, overestimating what they can get done, and blowing people off.  But having built ten businesses myself and done it wrong early on, I can tell you with confidence many companies like these will go out of business when the economic wave crashes, because the one thing that is making them a killing right now, will kill their business later - chasing short term profit.

Short Term vs. Long Term Profit

There are two kinds of profit - short term and long term. The landscapers and the vanity folks are all chasing short-term profit. Let's get as much now as we can regardless of the collateral damage it might cause to our reputation and our future. Carpe diem - seize the day, because tomorrow may never come.

Contrast that with a contractor I sat beside in a local coffee shop in 2009, in the worst housing recession since the Great Depression. He only built custom homes over $750,000 and there was an eight-year inventory at that time in Denver. Yet he had 17 confirmed projects he was starting, and even more crazy, he was building four more on speculation, totally comfortable that he would sell those, too. Why was he doing so well? We talked and he made it clear he had always built relationships, delivered the best quality, and kept his commitments no matter what the economy was doing. And as a result, he had all the business he wanted in one of the worst recessions since the 1930s, while droves of contractors went bankrupt.

Are you making decisions based on where you are, or on where you want to be?

Businesses that make decisions based on the long term are almost always successful in the long term. They're swimming with a bathing suit. The guys chasing today's short-term profit at any cost, they're the ones that will be swept out to sea when business is no longer finding them, because they won't be able to find business, either.

Great businesses always serve the long-term, best interests of their client and their market. Do that, and the next recession won't happen to you, it will happen to the guy beside you who is cutting corners right now.

Carpe diu visum - be like Warren Buffet and seize the long view.