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Clever Clues for Driving Your Business
Through a Downturn
In the RAN ONE planning
framework, business activity and decisions fall into key categories,
Vision & Strategy, Systems & Processes, Finance, Sales & Marketing, and
People & Culture.
Leading a business through an economic downturn means keeping your
finger on the pulse in each of these areas.
Nurture Your Vision, And Re-examine Your
Strategies
Be proactive! Look at stepping out into new market opportunities.
Stand back from your business, evaluate and examine your customers,
consider their changed needs, and take the opportunity to capture new
markets for your products and services.
Keep investing in innovation.
The Internet and technology in general have transformed customer service
expectations. In this environment, the risk is that your competitors
will meet customer demand for better service and outstrip companies that
don’t keep up. Put systems in place which give you instant access to
information, so your customers are served quickly. Smart companies will
utilize technology that integrates all of their customers’ previous
communication and history with the company, so they know accurately who
is contacting them.
Review Your Financial Systems
Optimize your working capital.
Now is the time to pay extra attention to credit and collections. Aim to
reduce receivables, manage payables and decrease inventories. Here are
some techniques:
a. Query major customers to find out whether they anticipate delays in
payment.
b. Contact suppliers to negotiate extended payment terms.
c. Cancel any outstanding purchases that are not essential.
d. Recognize all possible expenses and losses. Don’t be shy about
appropriate write-offs – including divisions and locations that no
longer make economic sense.
Review operating expenses.
Eliminate any unnecessary expenses. Having said this there are two
important areas where you should not slash budget.
Don’t make the mistake of cutting back on what differentiates your
products and/or services – your unique core differentiators. There may b
e 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.
Revisit your financial structure..
Make sure you have worked closely with your accountant and reviewed your
financial forecasts. Then meet with key lenders to review them – with
your accountant present, if this impresses on your lenders that your
finances and strategies are well prepared. Know where you stand with
them, and make sure their expectations are not too high. If interest
rates are falling, consider new loan or financing alternatives to reduce
interest expenses, improve cash flow, and provide credit for
acquisitions. Lenders and investors may also be more amenable to
restructuring they would never consider in better times.
Assess Your Sales & Marketing
Sustain high product quality and boost 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. Steps to take:
a. Make sure your business is ready to hook into the latest
communication technologies and give customers the freedom to contact you
by phone, fax, e-mail and the Internet.
b. Go through the exercise of classifying your clients into A’s, B’s,
C’s and D’s. Identify your ‘A’ class clients – these are your best
customers and responsible for the bulk of your revenue - give them VIP
treatment. You should also foster your relationship with any ‘B’, and
perhaps some ‘C’ clients you might be able to nurture into ‘A’ class
customers. In challenging times, it is an imperative for companies to
retain existing customers.
Don’t ditch your marketing budget.
Even in the most difficult of periods, core marketing and relationship
maintenance are essential to business recovery. If you need to reduce
sales and marketing expenditures, then consider innovative and more cost
effective ways to maintain your marketing imperatives. Sponsorships for
instance can give you wide exposure more cheaply, and if you are
associated with community activities (sports teams, charities etc) the
public relations attracted to your firm is positive. Your competitors
may even curtail sales and marketing expenditures, 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! Communicate! Communicate! Spread your good
news, bad news, plans, changes in plans, reasons for plans/actions,
successes, failures, etc. Stay real - tell the truth. Don’t paint a rosy
picture for your board and lenders. Credibility later will count for a
lot.
Focus On Your People
Remember the team is key to your business success.
It’s a tempting first resort to start a string of redundancies and lay
off team members when times get tough. Review your team carefully. Think
of it this way - a sports team doesn’t downsize to three quarters of its
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. You might decide to reduce your team, but it should be tied
very closely to that person’s long-term value to your organization.
Companies that cripple themselves by cutting into muscle will be slow
out of the blocks when the new cycle begins.
Lead your people.
Inevitably a depressed or down economy takes a toll on the psyche, and
it means making a conscious effort to retain a positive attitude. It is
a fact that no downturn lasts forever, and that most of our worst fears
and imagined disasters are never realized. Make it your goal to help
your team recognize the same realities. Don’t hide in your office – walk
around and talk with your people. 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.
Recipe For Success
Don’t overreact - and don’t under react.
Running a business in times of economic stress can feel 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 hazards in your path. And if you’re just
sitting still, you will fail to get moving in time to avoid the hazards
coming at you. The good leader, and the good business owner builds a
support crew: employees, accountant, lenders, investors and customers,
and navigates as a winning team.
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