Business survival in hard economic times…….
Some GREAT advice from my business attorney, Joan Jakel!
Joan says: I have been spending a lot of time consulting with clients and looking at strategies to deal with the down turn in the economy. Unfortunately, many businesses are struggling and trying to make the best decisions for these times. I want to encourage each of you, CHALLENGE each of you, to be confident and bold and get out of your comfort zone as you look at strategic alternatives for your business. It’s easy to get sucked into the challenges and focus on the all of the problems – but this doesn’t help fix them. And it’s incredibly challenging to fix the problems with the same eyes that created them or watched them occur while sitting in the same environment in which the problems exist. MOVE IT! Get out of your office and find a place that inspires you. If you need assistance, find a strategic, trusted assistant – another business owner, a coach, a mentor, an advisor, someone who can help you brainstorm and get your creative juices flowing.
I recently took an impromptu trip up to Sedona and surrounded myself in the magnificent and inspiring Red Rocks. I listened to Mark Victor Hanson and Jack Canfield on my way up and was completely inspired to get creative. I got the last room at the Sky Ranch Lodge where each and every room has a spectacular setting and the lodge sits on a bluff overlooking the city with incredibly scenic views. I discovered a local, fabulous café – the Heartline Café – with wonderful staff, friendly locals and a magical garden where I could spend some time setting the tone for my stay, including starting by listing my 100 goals. Needless to say, I had the most productive two days and came back ready to take action and help you take action.
For starters, I recommend that you read the book The Science of Getting Rich by Wallace Wattles. He first published the book in 1910 and it is still relevant to this day. You can read it in two hours and it will provide you countless guidance. Here are a few pointers:
Guard your speech. Never speak of yourself, your affairs, or of anything else in a discouraged or discouraging way;
Never admit the possibility of failure, or speak in a way that infers failure as a possibility;
Never speak of the times as being hard, or of business conditions as being doubtful;
Never allow yourself to feel disappointed;
When you make a failure, it is because you have not asked for enough; keep on, and a larger thing than you were seeking will certainly come to you.
In addition to reading this book, the following tips are designed to help you during this current economic climate. The following suggestions are designed to help minimize negative effects and enable your business to emerge with success on the other side of the downturn.
BUSINESS TIPS FOR DEALING WITH A DOWNTURN
- Rethink your business model. Re-examine your customers, consider their changed needs, and take the opportunity to capture new markets for your products and services.
- Optimize working capital. Pay extra attention to credit and collections. Reduce receivables, manage payables and decrease inventories. 1) Query major customers to find out whether they anticipate delays in payment. 2) Contact suppliers to negotiate extended payment terms. 3) Cancel any outstanding purchases that are not essential. 4) Recognize all possible expenses and losses. Don’t be shy about appropriate write-offs — including divisions and locations that no longer make economic sense.
- Examine all costs and operating expenses. Eliminate any that aren’t profitable, or don’t add value from a customer’s perspective. Don’t cut back on what differentiates your products and/or services. There may be a hidden opportunity if your competitors cut costs that lower their service level or product quality and you can continue yours or – even better – improve it. Don’t cut capital spending designed to improve productivity or R&D spending on new product development.
- Re-examine your debt and capital structure. Meet with key lenders to review your financial forecast. Know where you stand with them, and make sure their expectations are not too high. With interest rates where they are, consider new debt structures to reduce interest expenses, improve cash flow, and provide credit for acquisitions. Lenders and investors may also be more amenable to restructurings they would never consider in better times.
- Quality and customer support. Companies with a reputation for having quality products and services always come to mind first when a buying decision is being made. It is always good business to maintain a strong and comprehensive focus on quality and customer service. In challenging times, it is an imperative.
- Reach out to others and reaffirm existing relationships. Even in the most difficult of periods, core marketing and relationship maintenance are essential to business recovery. Do not curtail sales and marketing expenditures. Your competitors most likely will do so, giving you an opportunity to increase market share when others are losing theirs.
- Keep the lines of communication open. Nothing is worse than keeping employees, customers, suppliers and investors guessing about the company’s plans and actions during a time of uncertainty. Communicate good news, bad news, plans, changes in plans, reasons for plans/actions, successes, failures, etc. Deal with reality – don’t paint a rosy picture for your board and lenders. Credibility later will count for a lot.
- Focus on your employee team. Don’t automatically lay off large numbers of employees when times get tough. Remember that a football team doesn’t downsize to eight players when the game turns against them. The best teams dig in, and everyone works harder to make success happen. Instead of layoffs, consider pay cuts, reduced hours, and revised incentive pay plans. Align employee goals with the company goals by using creative compensation programs, so you can retain skilled employees for a quick start in the next upturn. Companies that cripple themselves by cutting into muscle will be slow out of the blocks when the new cycle begins.
- Remember the people side of the business. Recognize that a down economy takes a toll on the psyche, and make an effort to retain a positive attitude. Realize that no downturn lasts forever, and that most fears are never realized. And help your employee team recognize the same realities. Don’t hide in your office – walk around and talk with your workers. Make them true members of your team, keep them informed, solicit their best ideas, and help them see the light at the end of the tunnel.
- Don’t overreact and don’t under react. Times of economic stress are like driving a car in an ice storm: Jerk the steering wheel one way or the other, and you can find yourself in an irreversible spin. On the other hand, if you aren’t looking ahead far enough or proceeding with increased caution, you won’t be able to avoid the hazards in your path. And if you’re just sitting still, you won’t be able to get moving in time to avoid the hazards coming at you.
Remember, if owning a business was easy, everyone would do it. We do it because we are entrepreneurs – we challenge ourselves, we learn, we grow, we fail, we rebound and we succeed in a way that is personally defined by each of us. Keep the faith and keep moving!
Wishing you much success,