The Business Survival Kit – 7 Key Ingredients to Navigate Through a Recession

To state that our economy is less than business friendly would be a tremendous understatement. From real estate, to stock investments, to credit line decreases, to credit unavailability, both consumers and businesses have been devastated. As a result, businesses cannot sustain themselves with a “business as usual” mentality. It is easy to get caught up in the day-to-day reports of dismal economic news and assume a “victim” mentality. In order to survive, business owners need to be more proactive than ever before. In “The Seven Habits of Highly Effective Businesses”, Stephen Covey defines habit number 1 as being proactive as follows: “It means more than merely taking initiative. It means as human beings we are responsible for our own lives. Our behavior is a function of our decisions, not our conditions.” The key to survival is not worrying about things in the economy and business environment that you have no control over. Focus on the things you can control. Below are some key ingredients to focus on for you and your business: 1. Don’t Panic and Embrace Reality. It is difficult to make good decisions unless you understand the reality of the condition of your business and stay calm. To get a better sense of where you stand, review issues like your business’s current cash position and anticipated cash needs. 2. Adjust Expenses. Cut cost to maintain current income, eliminate unnecessary costs and look to reduce your remaining costs like changing vendors or renegotiating prices. 3. Plan Now. Create a plan now to respond to possible declines in future revenues before they occur. Develop a business strategy by reviewing your product/service line, identify the most profitable items and determine how to leverage those areas for future growth and profits. 4. Don’t Be the Bank/Collect Receivables. Watch for new patterns of slow payments by customers and follow up immediately. Review your largest customers and assess whether the credit constrain or economic slowdown will affect their ability to pay you. Keep receivables aging current at all times. 5. Evaluate your Business “Value Proposition”. How do you make money? Who buys from you? What do they buy? Is it location, customer service, cheapest price, convenience, best value, unique offering, etc.? It is surprising how many businesses take what they have for granted and are not really aware of the answers to these questions in the first place. Hopefully understanding the answers to these questions will assist you in putting together an effective customer service strategy that not only retains your existing customers but also attracts new ones in this economy. 6. Review Your Marketing Program. Often times when business begins to suffer economically, the marketing expense is one of the first cost-cutting targets. However, avoid the temptation to suspend marketing activities. Some cutbacks are probably warranted; however, a well directed targeted marketing campaign can be highly effective in getting people through your door. During a recession, sometimes you need to spend money to help improve the bottom line. It is easy to make the mistake of trying to manage a recession by cutting expenses and sitting back and hoping something good will happen. 7. Calming Your Employees. Retaining good employees is a key to surviving an economic downturn. A business is nothing without good people. During this time of uncertainty, it is very important to regularly communicate with employees how things are going and your plans for the future of the business. They need to be concentrating on your customers and success factors you identify in your plan for survival and growth for the future. In conclusion, it is important to maintain communication with your key business advisors such as your CPA, attorney and other trusted advisors. Those individuals understand you and your business, as well as the challenges you face on a day-to-day basis.  Dan A. Penning -----------------------------------------------