If one company takes action to respond to the situation and one company just hopes for the best, who is the most
likely to survive and be ready for the upturn?
If you want to do nothing and hope for the best, don’t read on. You will have plenty of time for reading when your competitors manage the downturn better.
So where to start. Take a look at the world around you and assess the risks. What is the effect of a downturn going to be on those areas that affect your business:
Sales & Marketing – Redouble Sales Effort
Sales are the lifeblood of your business but a lot of MD’s/Owners do not like the sales side of business and rather let it happen. Not anymore. Good salesmanship is not actually that difficult. It is mostly common sense – know
who is buying and not buying. Talk to the ones who have not placed an order this month and understand why.
Is there any fundamental change likely in their buying pattern?
Do you know how much share of business you have with each of your customers?
Can it be increased?
It is much easier to get business from existing customers than capturing new ones. Are there some obvious customers who you do not trade with?
What about an action plan to start a dialogue with them?
Is your service good?
What can you do better?
Examine your pricing. When did you last increase prices? You may have to find the courage to put prices up but if you don’t – Are there some low cost marketing actions that you can do?
Websites are not expensive and can replace expensive and quickly out of date brochures.
- Put a Sales & Marketing Plan together now
- Review your pricing strategy
- Sell, Sell, Sell
Operations & Resources – Doing the right thing, efficiently
When times are good we all get into a “nice to have” syndrome. Things get added because we think it might make life easier or better. In tough times decide what is really essential and what can be done without.
Look at your headcount. Make a 10% headcount cut part of your contingency plan. Usually there is someone whose performance is not satisfactory but the issue has not been tackled. If they need to go, should you start the process of removing them anyway? Make sure you use an HR Specialist to help with this. It can be done but has to be done correctly.
Often things can be made simpler and better. Time for radical thought. Look at how you’re doing things and see what can be done to improve effectiveness and efficiency.
Usually the people doing these things know most about them. So if you have staff involved in these activities get them involved too. Set up improvement teams. Give the projects titles and make a fuss of them. Review them regularly. Do it now while you still have the luxury of time and cash.
Communicate with your staff, management team, customers, suppliers and other stakeholders to keep them informed of what is happening with the business.
- Review your staffing- consider outsourced services
- Reduce inefficiencies and waste in your business
- Implement good, operational business processes
Finance – Cash is King
Cashflow has to the number one priority. If you run out of money the business is dead and all the hard work you have done is down the pan. And maybe your house with it! So do you know your break-even? Do you do a monthly cashflow forecast for the next 3 months?
These are two essential measures of the health of your business. If you do have them, we would recommend you start to do them right away. Most businesses know their costs base pretty well and what orders their customers are likely to place in the next month.
Forecasting sales for months 2 and 3 can be more difficult. Moving annual totals come highly recommended to cover the future trends in sales. You will quickly spot the turning points when sales go flat and subsequently start to turn down.
Clearly if the sales trend is down and approaching your break-even you need to take action. If you are not in this situation you should at least have a contingency plan to reduce costs. You also need to know how long these are likely to take to come into effect. It takes time to reduce costs. Your cashflow forecast can be used to see how this works.
Review your credit control processes. Do you get a signed order for everything? Do you get proof of delivery for goods? Make sure you have processes in place to follow up quickly with late payers.
- Review your cashflow now
- Look at cost reduction and where savings can be made
- Focus on getting money in that is owed
The old adage “failing to plan is planning to fail” is so apt for recessionary times. So start as you mean to go on.
It’s easy to make lists, much harder to actually make things happen.
If you’d like some help with this give us a call and we’d be delighted to help. You’d be surprised what can be achieved in a short space of time.
And how much more gets done with regular review dates with us to help you make sure that you really do implement your action plan.
Some 92 per cent of the business owners and managers surveyed by insurer QBE expect at least 12 more months of low or negative growth. Nearly two-thirds (65 per cent) of all respondents think a full-blown recovery will take two years.
Over 60% of small businesses in the UK are confident about their business prospects for the coming year, according to a survey by BT.
The survey of over 7,000 small and medium-sized firms also revealed that 45% say their business operates for the better as a result of the downturn, 75% of SMEs believe the economy will see an upturn in 2010 and 35% predict an improvement by January 2010.
“Despite the obvious knock to confidence, positivity about when the upturn will come is encouraging. The UK’s smaller firms are innovating to succeed and now more than ever, the right support and resources must be available to allow them to compete and thrive,” said Mick Hegarty, of BT Business
Half of small business owners expect trading conditions to remain the same for the remainder of the year, according to data released by Bibby Financial Services.
The Business Factors Index showed that 52% of small firm bosses expect trading conditions to remain the same in the short term and 10% expect the economy to have recovered by summer 2010.
However, 44% of business owners do not anticipate an imminent recovery and 19% do not expect trading conditions to improve for at least a year.
“October is always a busy month as businesses prepare for Christmas and, while the reminder of 2009 should see a broad uplift in trends as companies re-stock and find ways of capitalising on the downturn – such as taking on the supply chains of failed competitors – it’s unlikely the real problems will emerge until quarter one of 2010,” said Edward Rimmer of Bibby Financial Services.
The number of businesses entering administration in the third quarter of the year declined in every part of the country in every business sector compared to the second quarter, according to figures released by Equifax.
Equifax’s Business Failures Report revealed that every business sector has shown a downturn in businesses going bust in the third quarter compared to the previous three months. The best performing sector was the Wholesale sector, with the number of firms failing declining by 19.4%.
The Construction, Manufacturing, Services, Retail and Transport & Communications sectors all recorded double figure declines in company failures.
“This is the first Quarter for over a year when we have seen every region of the country and every business sector report a drop in failures. This must give businesses in general and the UK economy as a whole some confidence that the extreme difficulties we have been experiencing may be lessening,” said Neil Munroe, external affairs director at Equifax.
Almost 65% of business owners think that the recession has actually made their firms more efficient, according to research conducted by as part of the Barclays Take One Small Step Campaign.
The survey also found that 34% have taken on a greater focus on customer service and a quarter of businesses said they had made improvements to their business strategy as a result of the downturn
“Businesses are finding the upside of adversity wherever they can. UK firms have taken a pragmatic approach by tackling head-on the big challenges such as improving their business strategy, increasing innovation and focusing on their employees,” said Steve Cooper, managing director for Barclays Local Business.
Over 70% of small businesses in the UK have developed creative solutions to strengthen their company during the recession, according to research commissioned by the Department for Business, Innovation and Skills.
The study shows that 77% of small companies have adapted their business to cope with the downturn with 26% adjusting working hours, 33% investing in additional staff training and rewards and 65% exploring new product areas.
Just under 50% of respondents that made changes to their business did so to take a pro-active approach to the challenging economic climate and 37% said it was so they were ready to capitalise on the economic upturn when it occurs.
“In the face of a global downturn small businesses have developed and applied practical changes to get the best out of their people and enhance their business,” said Lord Young, Minister for Employment Relations.