Right now, the visionaries among us are engaged in a dual strategy. On the one hand, they're looking inward to shore up their businesses internally. On the other, they're looking outward, pouncing on opportunities created by the economic downturn. If you're not doing so already, here are some key steps you should take.
Make Internal Improvements
- Monitor cash flow.
Cash is king, now more than ever. Make sure your lines of credit are adequate, and pay extra attention to cash-flow projections. If you run short of working capital, manage by cash (not profit and loss statements). Monitor your numbers closely, and be ready to act.
- Review your strengths and weaknesses.
Know thyself. If you are aware of flaws in any areas of your business, remedy them now. They make you vulnerable. Similarly, find new ways to capitalize on your strengths. You need them more than ever.
- Rethink your sales strategy.
Identify your most profitable products or services, and focus your sales efforts accordingly. Use gross profit as a measure, or better yet, your gross margin return on investment.
- Categorize your customers.
Determine who's profitable, and who's not. If some customers are a drain on resources, either raise their prices or "fire" them. You can't afford to carry unprofitable customers along; you need to work lean and mean right now.
- Improve work processes.
If there are excess costs in your workflow, squeeze them out, so your business runs as efficiently as possible. Perhaps you can benefit from an assessment program such as Total Quality Management.
- Increase throughput.
During soft markets, customers often purchase in smaller quantities. Instead of turning small accounts away, find ways to accommodate them. If you can shorten lead and set-up times without compromising work flow, do so. It will add up.
- Ramp up marketing efforts.
What's the first thing many firms do to tighten their belts? The exact worst thing: cut back on marketing. Research proves that companies that maintain (or better yet, accelerate) marketing activity during soft economies reap greater benefits later. Besides, marketing firms are hungry for business now, so you can negotiate better deals.
- Review your compensation.
You need to get the most from your work force now. If you haven't already, put performance measurements in place and link compensation to performance. Think creatively: Can you lower base salaries while increasing results-driven bonuses? Remember, salaries are the single largest expense for most small businesses.
Seek External Opportunities
- Create strategic alliances.
Forming simple partnerships can save you money. Consider buying pools, rent sharing and equipment sharing as ways to reduce expenses. Another idea: Can manufacturers' reps and export agents give sales a boost?
- Renegotiate with vendors to reduce expenses.
Take your rent, for example. If your lease will expire in the next few years, suggest a longer-term lease in return for cost concessions. Or, if you are in a position to pay suppliers promptly, use it to obtain price discounts and promotional allowances.
- Target your competitors' customers.
If one of your competitors is struggling, reach out to its known customers. If those customers sense a decline in quality or fear a service disruption, they may be receptive to your pitch.
- Even better, acquire your competitors.
If you're in a position to buy out floundering competitors, consider it, but only if it will further your own strategic goals.
- Upgrade personnel.
There are many talented people looking for work right now. If you've been muddling along with mediocre employees, know that they're dragging your business down. If you can't bring their performance up to par, do the hard thing and make some changes.
- Keep your eyes open.
Be on the lookout for fresh ideas and opportunities. Stay abreast of news and trends. Interact with other entrepreneurs to see what they're doing. Learn from what's going on around you, and be poised to jump on opportunities when they come your way.
- When the going gets tough, smart leaders get going.
Be prepared, and be proactive. Your company can not only survive the recession, but also benefit from it, provided you take the lead.
Source: Entrepreneur.com by Ray Silverstein.