If you run your own company, you can’t help but notice that the current economic crisis could have a profound affect in the way you manage your business: from having enough cash on hand to meet payroll, to securing a line of credit to buy equipment, boost your inventory, or to meet monthly expenses. Likely, we haven’t seen the bottom of the market yet, something that continues to cause much fear and consternation around the globe.
A lot of what is going on today is well beyond your control and may, indeed, be as a result of what is taking place in markets beyond your own country’s borders. Never before has the global market been so tightly woven together, a double-edge sword that can lift all boats in good times and just as certainly sink the entire fleet in bad times.
Plan While You Can
Business owners know that in order to navigate the rough seas, a plan of action must be drawn up to avoid being pulled down into the financial vortex. Those plans must include keeping day to day operations going, promoting the business, and planning for the future especially in anticipation of better days ahead. Oftentimes when we’re in the middle of a crisis, it is virtually impossible to look beyond what is happening by envisioning that better days are coming. Having the foresight to plan for a rebound can certainly improve your company’s picture for the long term.
Today, however, there are enough troubles to handle, challenges which must be met and overcome one by one, to shake even the most confident person to the core. Gaining the upper hand during these trying times will mean that your business will continue to survive, if not thrive, provided you keep your head upon your shoulder and refuse to make any decision in haste.
The following are five tips that can help your business navigate the current financial crisis:
Team Up — I write extensively for the automotive industry and have been witnessing a trend lately that can help many companies survive the current downturn, indeed succeed for the long run.
Specifically, though companies are not necessarily merging, many have chosen to forge business partnerships to meet specific needs. For example, Chrysler and Volkswagen agreed in 2005 that Chrysler would supply the German automaker with a minivan to sell in the US. The Routan is on the market, a vehicle that fills an important gap in the VW line up, while allowing Chrysler to maintain production capacity at one of its plants.
You aren’t an automaker, but you may have a service or a product you could share with another company. Consider developing a mutually beneficial agreement that will carry you both through this current storm, a temporary business relationship that ends at a time agreed upon by both parties — nurture your partnerships!
Contingency Plan – If you were to lose a major customer tomorrow, how would that event affect your business? Although we plan to succeed, part of being successful in business is to recognize that if a major shift in business were to take place, you’d already have a plan in place to address those changes. Your company may have a plan in face to weather a catastrophe (e.g., fire or earthquake), but do you have a scaled down plan in place that addresses losing a customer?
Sometimes clients send out signals that they are having problems including taking longer than normal to pay their invoices. Get with your Accounting Department to learn who is falling behind, but be slow to renegotiate terms because a bankrupt business may never pay what they owe you.
Consolidate Operations — Nonperforming assets should be sold, business units that aren’t performing might be discontinued, and departments can be combined to bring forth greater efficiencies.
But, before you consider tossing your most valuable assets — people – look for ways to streamline expenses including trimming the fat from the phone bill, reducing energy costs, reviewing travel expenses, overhauling your advertising budget, securing credit while you can, build up equity, pay down debt, and convert adjustable rate loans to a fixed rate.
Regarding advertising, pare this expense very carefully. You still need to promote your business which includes sponsoring community events, pursuing new customers, and telling current customers what you have to offer to them. With a recession, you have much more latitude where your advertising monies will be spent; shop around and negotiate the most favorable deal for your business. Keep up with your SEO blogging.
Cash Is King – In a down market where credit is difficult (and expensive) to obtain, businesses with a lot of cash on hand are in the best position to weather the storm. Cash will also allow you to step in and snap up other businesses at prices well below the market rate, putting your company in a position to quickly expand when the market recovers.
Right now, assets are underpriced and some of your competitors may be failing; with plenty of cash on hand you’re in a position to buy, buy, buy!
Downsize Through Attrition, Hire Contractors — If your company is in a position where payroll must be cut, try to reduce staff through attrition first. Next, offer early retirement or an incentive package to help others move on, but do everything within your means to keep your best people hired. Tread softly because you don’t want to spook your best employees who might jump ship if they think that your boat is ready to sink.
If you find that you need new personnel to fill vacancies, use contractors and temporary workers to supplement your workforce — a corps of last hired, first fired people who won’t sink your company’s morale if they are let go. When the economy improves, offer permanent work to your best supplemental employees.
These Are The Best Of Times, These Are The Worst Of Times
To paraphrase Charles Dickens, these are the best of times for some companies but they are also the worst of times for other businesses. You probably already know where your business stands at the moment, but that doesn’t mean you’ll find yourself in the same position in just a few months time. Inaction will sink your business, but aggressive planning will just as certainly give you the opportunity to not only survive tough times, but to thrive.