This is the final article of a three-part series, Thriving When Times Are Tough, dedicated to helping keep your business strong in a troubled economy. Part one covers cash flow management and part two covers checking the pulse of your business.
A recession is like a natural disaster: some survive because they were in the right place at the right time, but usually, the survivors are the ones who were prepared.
Some people believe the recession has ended or will end soon. But it is still a very difficult economy, so it might seem like it’s a little late to talk about preparation. And in some ways, it is – but this is also a great time to prepare for the rest of this downturn by getting back to the basics and focusing on changes that can help ensure you survive the storm and position yourself to increase market share on the upturn.
Cut With Care
Regardless of your financial position, it never hurts to look for ways to cut costs. There are a lot of simple changes to make that can, over time, have an impact. For example:
- Cut unnecessary expenses like travel and entertainment.
- Look at your utility and phone expenses. Have you negotiated a lower rate lately? Now may be the time.
- Reduce office cleaning, or clean your own office instead of paying a cleaning company.
- Re-use office supplies when possible.
- Set up your printers to automatically print double-sided. Some printers also have the option to print in “draft” quality, which uses less ink – and since color ink costs more, print in grayscale when practical.
There are also some more strategic cuts you may want to consider depending on your culture – some of which are much tougher decisions.
If you absolutely must resort to employee reduction, see where you can improve efficiencies to do more with less,” said Chad Bice, CPA, principal. “Determine if you have the right number of employees – or whether your employees are filling the role that suits them best.”
“You might be able to temporarily reduce or eliminate your 401(k) match,” said Mark Van Benschoten, CPA, principal, “or ask employees to pay a higher portion of the health insurance to save money.”
Watch Your Budget, Expenses and Cash
“Your budget is really important now,” said Mark McKinley, CPA, shareholder, “and if your revenues aren’t what you expected, you have no choice but to cut expenses. You should only spend money on things the business needs – not wants.”
McKinley also stressed the importance of your financial statements. The financial statements don’t lie – they’ll tell you if your business is in trouble.
“Your focus should be on cash flow generation and conservation,” said Bice. “Work with your supply chain and bank to conserve cash. Generate new cash flow through sales and tax saving opportunities – and any other way you can.”
Now is the time to get creative. Zig when everyone else is zagging. Be agile and if you come to a turning point, take it.
“Figure out what products or services are making money and focus on them. Trying to be everything to everyone can stretch you too thin,” said Bice.
“Don’t accept the poor economy as an excuse for under-performance,” said McKinley. As your competitors are failing, there is business to bring home. Go out and get it. And as your competitors are laying off their qualified, experienced workforce, snag them up if you have some wiggle room in your payroll. If you can’t afford to bring them on board full-time, can you pay them for some contract work to start a relationship that could evolve once you’re in a more solid financial position?
Respect Your Employees And Value Your Supporters
Employees. Your team is arguably your most valuable asset, and you should keep them happy and productive. If employee costs and payroll are hurting you, lay-offs might be the quickest way to cut expenses, but you may want to avoid them as long as possible.
“Instead of lay-offs, consider furloughs, or mandatory days off without pay, to maintain your work force,” said Van Benschoten. “One unpaid vacation day per month is equivalent to a 3 to 4 percent pay cut. If you do this, you’ve got to set the tone at the top – leaders should take the same furloughs as everyone else.”
Always be honest with your employees about your financial position and finally, focus on the positive. Celebrate successes. Keep morale up and try to have some fun if you experience some down time.
Supporters and Similar Organizations. Not-for-profit organizations especially need to keep their supporters happy. “Maintain frequent communication with your funders,” said Van Benschoten. “Give them honest status updates and news they can use instead of only contacting them when you need money.”
That includes board members, too. Maintain an open dialogue – and perhaps meet more often to discuss financial standings.
If possible, you should look for other organizations to partner with. If you are planning a conference or event, for example, invite another organization to piggyback to help share costs and manpower. A lot of organizations are struggling in the same ways, and if you can find one whose mission complements yours, it’s a natural fit.
While it may be too late to brace your business or organization for the initial landfall of the recession, you might still have time to grab your emergency kit and head to higher ground – to position your company to reap the rewards that will come with a strengthening economy.
This article was originally published in The Rea Report, a Rea & Associates print publication, Fall 2009
Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article