Ten Tips For Tough Times

How can businesses cope with declining customer spend, tighter credit periods and the general purchasing restraint that comes with an economic downturn?

The answer is relative to your business model, your client base, your industry sector and so on. However, in principle, for the entrepreneur or business owner, the 'cash last' approach should always be considered, either in a start-up situation or for a growing business.

Ten tips for tough times:

1. Keep stock moving - Engage in strong marketing to sell current floor stock. The worst thing you can do is let stock become obsolete.
   
   
2. Work your assets! - Only replace hardware when you absolutely need to. Even if items are fully depreciated, as long as they function, keep them.
   
   
3. Restructure longer-term debt if necessary - Lenders are generally happy as long as debt is being serviced and you're talking to them, they are reassured of your professional approach to management. A little restructuring is always an option to free-up some cash.
   
   
4. Tactical, below-the-line marketing is imperative - Despite economic concerns, maintain and perpetuate your marketing activity. Such as:
   
   
   • Simple service-based offers; packaging groups of products together (a toothbrush with the tube of toothpaste).
     
     
   • Cost-effective marketing methods to remain on your customers' radar. Businesses still need to spend and consumers still need to buy - sometimes as a tonic to help deal with the economic downturn.
     
     
5. Build up a cash reserve - Arrange short-term finance options early. The last thing you want is to run out of cash, so put facilities in place from a range of affordable sources - even if they are a little dearer than longer-term debt, better to have the option than to go 'cap in hand' to the bank.
   
   
6. Defray overheads - Where-ever possible.
   
   
7. Enlist HR management strategies -  Have your current staff work to competent capacity. If necessary, look to reduce casual or contract staff hours to those that are not core to your business.
   
   
8. Talk to creditors and free-up cashflow - Arranging or extending credit can free-up a lot of cash and this can help.
   
   
9. Look to reduce general administration costs - Reduce call charges by seeking comparative offers from competing telecommunication companies.
   
10. Move your business model to a lower cost base - By analysing the key costs of the business and the revenue they generate, it is possible to rationalise and focus on core business. Even if it is painful to cut some things out, business is about adapting to the prevailing conditions.
    
    

Some of these expedients require you to make some difficult decisions, but it is a route to survival. Ultimately, a leaner, fitter business will emerge, all the more competitive for having weathered the storm.

Be warned, however, your business cannot afford to sacrifice quality of product or service, nor customer service and relationships. These issues are sacrosanct. The question, of course, will be "Why didn't we do this sooner?".

Ric Willmot, known as ‘The Consultant's Consultant’, is the CEO of Executive Wisdom Consulting Group www.executivewisdom.com; and the Founder of the Society for Executive Wisdom www.executivewisdomsociety.com. Subscribers of CEO Online receive 10% discount on all seminars and workshops by Executive Wisdom Consulting Group.
First published: 4 August 2008.
Last updated: 4 August 2008.