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How to successfully navigate your business through an economic depression
An economic downturn is a phase economic cycle in which the economy as a whole is declining. This phase basically marks the end of the period of growth in the cycle. Slowing economy characterized by low levels of consumer purchases (especially of durable goods) and, thereafter, levels production companies.
While economic downturns are admittedly difficult, and are formidable obstacles for small businesses trying to survive and grow, an economic downturn can open up new perspectives. A well-managed company can have the chance to win market share by taking customers from competitors. ingenious entrepreneurs seize the opportunities available, an economic downturn, by developing other Doing business has never been implemented for a period of growth earlier.
The challenge of successfully navigating your company through a recession in the restructuring of its economic activities with current economic realities. Specifically, you as a business owner, need to renew focus on key clients and customers, reduce operating costs, conserve cash, and manage more proactively, rather than reactive is essential.
Here are the best practices to help you successfully navigate your business through an economic downturn: Goals: The main goal of any owner Business is surviving the current economic crisis and develop a more agile, profitable and a more efficient operation. The secondary objective is to grow the business even during this period of economic downturn.
Objectives:
• conserve cash.
• Protect assets.
• Reduce costs.
• Improve efficiency.
• Increased customer.
Action Requested:
• Do not panic … History shows that economic crises do not last forever. Stay calm and act rationally as they refocus their attention on resizing your company's current economic conditions.
• Focus on what you can control … Do not let the media rhetoric about the recession and economic slowdown will prevent the success of businesses. It's a trap! Why? Because the economic situation is beyond their control. Surviving the economic downturn requires a focus on what you can control, ie your relevant activities.
• Communicate, communicate and communicate! Beware of the trap try to do too much on their own. The task is very difficult to survive and to grow your business solely with their own efforts. Solicit ideas and seek help from other people (employees, vendors, suppliers, customers and consultants). Communicate honestly and consistently. Effective communication in both directions is the key.
• Negotiate, negotiate, and negotiate! The value of a set Strong negotiating skills can not be overestimated. Negotiating better deals and contracts is an absolute necessity to harmonize and resizing your company to current economic conditions. The key to success is not only how to develop a win-win in negotiations with all parties, but also taking into account that for a favorable outcome for you.
Recommended Best Practice Activities:
The nuts and bolts … The following list of recommended practice of physical activity is essential for the survival of your company and its growth during economic downturn. The financial health of your actual business in particular, at the beginning of the economic recession which will determine the priority and urgency of the implementation of best practice activities below.
1. Diligence follow your cash flow: Forecast your cash flow monthly to ensure that expenditures and expenditures respond to debtors. Include cash flow statements in its monthly financial reports. Project cash requirements three to six months in advance. The key is how monitor, protect, control and put money to work.
2. Carefully convert your inventories: Convert excess, obsolete, and inventory items sitting around in cash. Consider returning excess and slow components back to suppliers. Sales reduction Closing stocks or work well to resize your inventory. Also, consider reducing its product offering. The possibility of order placement allows reduce excessive levels of inventory and material shortages from time to time. The key is to reduce the amount of dead stock sale lose.
3. Collection of accounts receivable fast: This asset is quickly converted into cash. Offer prompt payment discounts to encourage timely payment. Make changes in the conditions of sale for slow paying customers (ie changing net 30 days for COD). Billing an important part of managing cash flow. The first rule of invoicing is to do as soon as possible after products are shipped and / or after services are rendered. Focus on reducing billing errors. Most customers delay payments because an error in billing, and therefore will not pay until they receive a corrected copy. E-mail or fax your invoices to save on delivery. Since payments received and make deposits more frequently. The key is to develop an efficient collection system that generates time payment course and that gives notice of problems.
4. Re-focus their attention on existing clients and customers: Make customer satisfaction your priority. A periodic review of the history of their customers to purchase and frequency of purchases can reveal some interesting facts about their shopping habits of customers. Consider signing long term contracts with major clients and customers to add to their security. Offer a discount for cash payments in advance. The key is to do what is necessary to keep existing customers loyal.
5. Re-negotiate with its suppliers, lenders, and the owner:
i) Suppliers: Always keep negotiations on the level of need, saying that his company has reviewed its cost structure and has determined that it needs at lower costs supplier. . Tell the supplier that you value their relationship developed, but you need to receive a cost reduction immediately. Ask your supplier for a lower price equipment paid over a long cycle, and disposal costs of financing. Also, see if you can buy material in a lot of them. In exchange for concessions from its price, be prepared to accept a long term contract. Explore the concept of barter as a form of payment.
) It Lenders: Everything in corporate finance is negotiable and your relationship with a bank does no exception. The first step in the successful renegotiation is to convince lenders of last resort, you can afford loan renegotiated. You must bring to your lenders why it would be in your best interest based on a new agreement. Show them your business plan and action plan including its cost savings initiatives, and the "how" and "when" of the implementation of its plan is the best way to achieve this goal. Explain that you will need your cooperation to ensure they can survive, and, growing your business during the economic recession. issues to be negotiated include: interest rates, the required security to cover the loan and the date of commencement of repayment. A start date repayment could be immediate, within several months to a year. The key is to realize that your lender work with you, but that communications frequent and continuous contact with them is essential.
iii) Owner: Meet with your landlord. Explain your need to extend the duration of your lease at a reduced cost. Of course that has a clause in the lease that entitles you to have the right to sublease all or part of the premises.
6. Reassess staffing requirements: This is a very critical area. Wages and salaries represent a significant cost doing business. Therefore, any reduction in working hours by changes in working hours, short-term layoffs or permanent layoffs has an immediate advantage of savings. Most companies ramp hiring new employees in good times, only to find they are currently too many because of slow sales during the period of economic slowdown. With regard to downsize its staff, be very careful not to reduce staff to a level that forces you to skimp on customer service and quality. Consider the use of workers Part-time or the current trend of outsourcing certain functions to independent contractors.
7. Shop for improving Insurance Rates: Get quotes from insurance agents for a similar coverage to determine if your insurance company Current is competitive. In addition, the ability to review your coverage to reduce premium costs. The key is having the right balance to be adequately insured, but not under or over insured.
8. Re-evaluate your advertising: Contrary to reduce costs -Other initiatives, evaluate the possibility of increasing their spending on advertising. This tactic realizes the advantage of reducing "noise" and congestion (fewer advertisers) in the market. The crisis period an opportunity to increase awareness and create additional demand Tender your product or service.
9. Seek help of outside advisors: The use of an advisory board your accountant, lawyer and business consultant offers you objectivity and provides advice and counseling. Their collective experience in working with similar situations in times of economic downturn the past is invaluable.
10. Review your other expenses: Target an initiative to reduce costs-linear 10-15%. Attempt to eliminate unnecessary expenditures. Tighten the belt to overcome the difficulties practical sense, financially.
Proactively manage your business through an economic downturn is a challenge enormous and essential to their survival. However, through well-planned initiatives, a recession could create huge economic opportunities for your company to gain greater market share. To exploit this growth opportunity, you must act quickly to implement the best practices of companies can continue realigning and resizing your company to the current economic climate.
Copyright © 2008 H. Terry Hill You may reprint this article free of charge in your newsletter, magazine or on its website, provided that the article is not published, and the copyright, author bio and contact information below appears with each article.
About the Author
Terry H. Hill is an author, consultant, trainer, mentor, and the founder & managing partner of Legacy Associates, Inc., a business consulting firm based in Sarasota, Florida. Legacy, http://legacyai.com, is the parent company of the online small business, entrepreneurship, and management training website, http://www.TrainingforEntrepreneurs.com.
A veteran chief executive, Terry works directly with business owners of privately held companies on the issues and challenges that they face in each stage of their business life cycle. Terry is the author of the business desk-reference book, How to Jump Start Your Business. Contact Terry by email at http://www.legacyai.com or telephone him at 941-556-1299.
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