Page 14
Recyclers News Press
Survival Tips for Managing During an
Economic Downturn*
Making Opportunities out of Slowdowns
During periods of economic decline, whether wide-
spread or cyclical for a particular type of business,
small business entrepreneurs are most likely to bear
the brunt. Yet the fact that conditions are changing
opens up opportunities for resourceful firms to out-
smart larger competitors who, during a downturn,
carry on business as usual or are unable to adapt
quickly -- except to fire employees. Such innovative
small firms can:
Gain market share by taking it away from competi-
tors unable to adjust to shifting market
conditions.
Maintain a strong cash stream throughout the down-
turn, in contrast to other com-
panies
that may have liquidity prob-
lems.
Become a leaner, more cost-
effective and more efficient
operation, better positioned to
do
well when the market im-
proves.
The challenge is to be aggressive and imaginative.
Entrepreneurs who survive and even prosper during
hard times must be able to look beyond the present,
to overcome the constraints of tradition, to see the
firm from a new perspective, and to do business dif-
ferently.
Here are some specific recommendations for small
business owners and managers to follow during
economic upheavals:
1.
Watch your inventories carefully, but don't
hold them down so tight that you'll lose sales.
Typically during a slowdown, there is an imbalance
between slumping retail sales and bloated invento-
ries -- don't be saddled with merchandise that ties
up your cash flow.
2.
Monitor your cash flow very diligently, and
forecast it monthly to ensure that expenses and
planned expenditures are in line with accounts
receivable.
Make sure your financial statements
provide information that is timely, relevant and accu-
rate. Cash flow statements are superior in this re-
gard to income statements and balance sheets. Be
able to project where you will stand three months in
advance.
Negotiate with suppliers for better prices or short-
term reductions, and even consider trading goods
and services on a barter exchange for credits in-
stead of for cash. Take advantage of supplier dis-
counts for prompt payment, and
don't pay checks for no-
discount bills before they're
due. If the cash bind has al-
ready surfaced, talk to creditors
before the bills are past due to
persuade them to extend pay-
ments of your current bills. Your
chances of getting their coop-
eration will lessen if you wait until they send collec-
tion memos.
3.
Watch the creditworthiness of your custom-
ers
, even bread and butter accounts. Remaining
close to existing customers, and checking to see
how they are getting on during the economic down-
turn, not only helps avoid unpleasant surprises but
could also lead to new opportunities. Besides, when
sales are sluggish, keeping in touch with customers
(always a sound business practice) becomes vital to
head off eager competitors. Encourage sales peo-
ple to call on every customer on a regular basis,
and set aside some of your own time to do the
same. Face-to-face meetings with your client base
provides an excellent opportunity – probably your
only one -- to pacify disgruntled customers and win
back lost ones. Try to lock up long-term contracts
with your most important customers at anything ap-
proaching acceptable terms.
Page 15
Recyclers News Press
4.
Get aggressive with collections.
According to the
partner of a consulting firm, "when business is good,
companies tend to become lazy about collecting on
receivables. This can prove dangerous in a reces-
sion." Assume that the average collection period for
your industry is 45 days, but your company is at 51
days. After bringing that collection period down to the
industry average, keep working to get it down to 40
days. Being tough with customers may be unpleasant,
but it's an important safeguard against the effects of a
prolonged economic slowdown.
5.
Consider delaying both the purchase of high
ticket items and expansion plans that take a long
time to pay off.
At the same time, make
sure you have enough capacity to start
filling orders again when the economy
stabilizes.
6.
It is a mistake during recessionary
times is to reduce training budgets.
Training can
best be conducted during slack periods --
especially low-cost, on-the-job instruction
and broadened skill acquisition. Also,
local community colleges offer a number of free
classes that teach and upgrade trade and office skills
and supervision techniques.
7.
Now is the time to be prudently aggressive in
the marketplace.
Actively seek out new business,
and perhaps add a salesperson or two or an extra
service to give you an edge over competition.
8
. Don't skimp on service and quality by being un-
derstaffed
. Options include freelancers, consultants
and part-time employees. One advantage of a slow-
down is that hiring gets easier because there are
more candidates from which to choose due to layoffs
and other cutbacks.
9. In strategizing how to build your customer base and
induce current customers to raise revenues,
the im-
portance of good service cannot be overstressed
-- especially as their buying power or willingness to
spend is lessened during tough economic times.
Studies show that perception of service is fixed pri-
marily in terms of time in a customer's mind. Three
examples are: waiting time to obtain service; reaction
time to deliver service; and length of time of the ser-
vice.
In banks or stores, or phoning in orders, prospective
customers will walk out or hang up if their time per-
ception is strained. According to management con-
sultant Donald Blumberg, author of
Managing Service
as a Strategic Profit Center
, customers
will temper their time demands when they
see store employees busy helping other
customers. But they will not be so tolerant
when clerks are chatting with one another
or on the phone while waiting customers
are ignored.
10. Many businesses reduce advertising
and promotional expenditures rather than
slash fixed costs during hard times. How-
ever, studies have shown that those
maintaining or
increasing ad outlays during slowdowns wind up
outselling rivals who cut back
. Savvy marketers
can boost sales and market share, even if the industry
in which they compete is in a slump, by focusing on
short-term tactical techniques such as sales and price
promotions, and tailoring advertising in response to
the shaky economic climate.
Savvy marketers can boost sales and market share,
even if the industry in which they compete is in a
slump, by focusing on short-term tactical techniques
such as sales and price promotions, and tailoring ad-
vertising in response to the shaky economic climate.
Continued on next page...
Survival Tips for Managing During an
Economic Downturn*
Making Opportunities out of Slowdowns
