Weed Your Garden

This may be your first recession, unfortunately, probably not your last.  This short article will give you some suggestions on  taking action to protect your business and even grow it.

Right now there are two large economic problems on your doorstep: a shrinking of commercial credit, and a softening of consumer confidence.  Other factors looming include inflation, rising interest rates, rising transportation and raw materials costs.

The first change you can make right away is to accept the notion that things are not going to be the same as they've been, for your clients, partners, and employees.  The second is to believe that there is a way for you to do better than just survive the recession. Even in a down cycle there are lots of opportunities, and bad times don't last forever. 

BOOKKEEPING

The first thing you can do is financial.  Step up collections.  So many companies don't do this until it's too late, through fear, ignorance or lack of sound bookkeeping help.  You need to make sure your billing is going out in a very timely manner.  You need to ensure that your book keeping system shows actual aging of invoices.  Show me the number of days since a client was sent a bill.  Show me the number of days since a delinquent account has been contacted. 

Get in the habit of looking out for your receivables on a weekly basis, not just once a month.  Make some collection calls yourself don't just rely on your staff.  It's good to let your clients know you're serious, and it helps your staff see that you're willing to roll up your sleeves too.

Remember that even your best clients may find themselves in cash or credit problems.  Without active collections and a firm receipts policy your cash flow could be compromised. When it means the difference between 30 days and 120 days, your business may be on the line.
 
COSTS

Next, look at your hard costs (human capital, raw materials and machinery).

If you have machinery, this is a good time to consider whether you need to replace or repair equipment.  It's not just about saving money, it's also about planning for the future. 

Are your raw materials going up in price, should you lock in now?  If you rely on commodities make sure you have up-to-date knowledge of the trends.  Don't just rely on your suppliers. 

Take a long, hard look at your personnel situation, but exercise caution.  Don't make short- sighted decisions that will compromise your product or irritate your customers unnecessarily.  Always try to make your company stronger as you make cuts.  You need to be thoughtful, careful, and above all consistent in anything having to do with your employees especially their schedules, salaries, or benefits.  Demoralizing the remaining staff is costly. 

CLIENTS

If you are stressed about cost cutting, take a look at your client list.  I have a counter-intuitive suggestion.  For the health of your business, it's OK to trim your clients.  Sounds insane perhaps, but it can make great sense.  In short, bad clients cost you more than just money, good clients pay dividends.  You may have clients that force you to do business in a certain way that is unhealthy for your business.  Just because they bring in revenue, doesn't mean they are profitable for you.  Maybe you're carrying some costs you wouldn't need if you had a different client list.   If you are going to make some hard strategic choices anyway, this is an incredibly valuable place to look.

THE BUSINESS YOU HAVE OR THE BUSINESS YOU NEED?

Now that we've taken a look at ways to improve your existing business, look around your company and try to imagine how you could take what you're doing now, and make it work in a different industry, or for a different purpose.  Ask yourself, can you change your product mix to make it relevant in this economy?  It may be only a tweak to an existing product, it may mean different business cards, or you may have to throw away old stock, and invest in something new.  If you have employees or partners, start asking if they have ideas for your services, or if they have friends in different industries.   Look for trends you can build on, and make a plan to get there.  

Use the economy as a lens to take a fresh look at your business and how you can make it better.