Four Ways for Your Business to Survive and Thrive in a Down Economy

As a business owner, bad news on the economic front causes worry—worry about you and your family, about your business, and about your employees.  Question is, what can you do about it? 

Four Ways to Survive and Thrive in a Downturn

The biggest mistake that business owners make in a downturn is to be overly optimistic and do nothing—to simply wait for things to improve.  Oh, you might think that your business is “recession-proof”, or that you are better-prepared than your competitors to weather a downturn.  But are there signs of trouble?  Are incoming orders declining, or are customers lagging behind on payments, or are inventory levels slowly creeping up?  Rather than ignoring these signs, now is the time to really put your ear to the ground and find out what your vendors, suppliers, and customers are saying.  Listen to your front-line employees.  Then:

1.  Begin by building contingency-planning into your business plan.  What if your customer can’t pay that large account receivable on time?  What if your sales staff doesn’t reach established sales goals?  What if that new line of inventory doesn’t sell before you have to make your vendor payment?  Can you stay in compliance with your loan covenants at the bank?  Now is the time to pro-actively enlist the help of your banker and your other advisers–knowing that you are looking ahead and positioning your business for a downturn will give them confidence in you, and they will be more able to help you during difficult times. 

2.  Keep in mind that cash is king, and anything you can do to maximize cash will put your business in a position of strength.  Get rid of slow-moving or obsolete inventory through special sales.  Think of other uses for inventory that might create sales in non-traditional markets.  Monitor your accounts receivable and demand payment on time.  Don’t become your customers’ banker—expanded terms mean expanded risk.  Be prepared to cut off, go COD, or file a mechanic’s lien if necessary, as a customer who is solvent today may be in bankruptcy tomorrow.  And finally, look at your fixed assets with an eye to selling anything that is non-productive.

3.  On the expense side, use a critical eye in determining your cost structure.  Do you have the right people in the right spots?  Are your employees performing at their maximum?  Are you organized properly? Ask your employees to look at their job descriptions and duties—are they doing something because “it’s always been done”, or are there some duties that can be dropped or done more effectively?  Is there duplication of efforts anywhere?  Have your expenses been creeping up?  Find out why.  From this analysis, identify 5-7 expense-reducing opportunities and make them happen.

4.  Identify your most profitable product and service lines, and those with the most potential to grow. Contrary to what many believe, those who thrive in a downturn avoid diversification and, instead, focus intensely on those products and services that make up their core business.  If possible, sell off—for cash—those lines that you don’t feel contribute to your core value as a business.  Save the cash, or use the proceeds to invest in assets that will further what really makes you money.  And for goodness sakes, don’t cut the advertising budget for those revenue lines that will keep you in the industry forefront.

Move Forward Enthusiastically

At this point, make sure your entire workforce is engaged and moving in the same direction—develop a mission and vision to sell the profitable products and services upon which you have built a solid reputation.  Generate enthusiasm for the task at hand—after all, being part of a company that is moving ahead in a downturn vs. simply digging its head in the sand is exciting!  And be sure to celebrate small successes and milestones along the way. 

If you’ve done these things, be assured that you are doing everything you can to survive and thrive in a tough environment.

By: Julie Baumgartner, Vice President

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