SURVIVING ECONOMIC HARD TIMES

SURVIVING ECONOMIC HARD TIMES

It is no secret that in general the American economy is facing some heavy duty challenges. Some industries and some areas of the country are more distressed than others, but everyone will be affected in some form or the other. Auto manufacturers, bankers, home builders, the travel industry, retail; you name it. Just about everyone is feeling the pinch right now.

High oil prices, high food costs, investment errors, and world events can and are grabbing dollars that once was yours. Talk to the person earning minimum wage and ask how they are doing. It is not funny and it is not going to get any better for a while. Even if things suddenly turned around, it would be a while before businesses that are being hurt the most can adjust. So brace yourself, but don’t be a Chicken Little and believe the sky is falling in. It is not! But, don’t expect miracles.

It’s in the news! GM is cutting back production, laying off workers, slowing assembly lines. Ford, Chrysler, Toyota, and Honda, to name a few, are doing the same and in addition, they are dropping their auto and truck lease business. Everyone is cutting, cutting, cutting! The President just signed a bill to bail out the housing industry.

The American public drove billions of miles less in the last two months due to fuel cost. If that continues what do you think that is going to do to businesses that depend on travelers? How do you think all this is affecting Walt Disney and the Cruise industry? With the devaluation of the dollar, how do you think International travel is doing these days?

Believe it or not, some businesses will actual thrive during economic downturns. New businesses will be established that offer new and innovative products and services that will offer solutions to some of the worlds major economic and environment challenges. Already, major advances are being made in the recycling industry. The future may see fewer land fill and garbage challenges as entrepreneurs discover new methods for recycling the contents into products that can and will improve our health and our life styles.

Huge strides in the health and insurance industries are making their way to consumers that will help alleviate some of the financial burdens low income people face everyday. Congress is working on new ideas to support and even boost the economic environment, all of which will have an affect on your pocketbook.

In addition to new oil and gas discoveries, the possibility of new refineries, increased interest in wind technology, and solar energy, new ideas for creating energy efficient transportation, and stand alone energy efficient homes, are all new ideas that are soon to hit the market that will create energy efficient manufacturing processes, and will reduce our dependency on foreign energy supplies.

There is good and bad in every situation. And, of course, unless you have been hiding under a bushel basket, you already know all of the above.

There are things you can do to grow your business and survive during an economic downturn, but you have to TAKE ACTION NOW and as you do, remember this; a business that is going backward is dying. Think growth! Think profit! You cannot straddle a barbwire fence. You will either fall off one side or the other. Fall is not what you want to do.

Listed below are a few things that every business should be doing during good time and bad times:

Work harder ON your business than you do IN your business. Working in your business doing things that others should be doing will not give you the necessary time to think and create ideas to grow your business. Put the right people in the right seat and let them do their job. You do yours! THINK! That does not mean that you should take off and run around the country playing and call that ‘thinking.’ In hard times you have to be on top of every aspect of your business.

Analyze every expense item and cut all unnecessary expenses by at least 10%! THINK! Do not cut expenses that drive the business forward. If you cut your sales force you can expect lower sales than you already have. Motivate your sales force! Establish incentives and marketing ideas that will drive sales. If you need to cut payroll, cut yours first. Don’t ask your team to do something you are not willing to do.

Do not cut your advertising budget. Advertising is what attracts new customers, but don’t throw money in the garbage can either. If your advertising is not bringing in NEW customers, you are doing something wrong. THINK! Find ways to improve your advertising. Learn to track results. For every dollar invested in advertising and other marketing procedures you should get a measured return. THINK! Don’t duplicate what you did last year. If it didn’t work last year, what makes you think it will work this year? Come up with creative advertising and marketing ideas that will drive the business forward. THINK! Survival is hard work! When you want to speed up, push harder on the accelerator. Just do it more efficiently!

Find ways to increase your margins. It does not matter what kind of business you are in. People buy people first then goods and services. If you believe that price alone is what drives your business, you are very mistaken. Any child can cut prices and increase sales. You can grow broke! If you are not making sufficient margins you should THINK. Margins are the difference between your gross sales and your cost of goods sold. Examine every aspect of your cost of goods sold. Find ways to work with your suppliers to cut cost in raw materials, freight, terms and shipping. Adopt a “Just-in-time” inventory policy. Improve your turn rate by just one turn and improve your bottom line by 25%. Find ways to improve product development and improve labor procedures that drive up margins. If you can find ways to improve production with one laborer verses two, what are you waiting for? THINK!

Manage your cash flow. Keep accounts receivable current. When you sell a product and issue an invoice, you just became a banker. You have loaned your customer your company’s cash. Make sure you are getting it back within terms. If not, the customer should be willing to pay an additional finance charge of at least 1.5% per month for any unpaid balance. If you do not pay your banker on time or if your checks are bouncing, your banker will surely attach additional charges on those activities. Sometimes customers who do not pay you on time are also experiencing cash flow issues themselves or they could be spending their money with another vendor and skipping you. They may also be changing vendors, so not paying you on time does not matter as much to them. When a new customer places a very large order with you, before shipping be sure you check to see why they are leaving their prior vendor. Could be they did not pay as agreed.

Find new products and services that will have the effect of leveling the playing field and increasing margins. Business is constantly changing and most businesses have ebbs and flows (peaks and valley’s). Yours is no different. If you can find new ideas that fit well within your current offerings and will increase sales and profits, it might be a good idea to study your present product line, reduce non-selling inventory and add those products and services that will level the ebb and flow and enhance your chances of success.

Think of ways to improve your net profit on fewer sales. Profit is what you are in business to create. When you are in the survival mode, forget all the philosophical stuff and THINK. You will save jobs, increase sales, increase production and SURVIVE if you THINK about every possible ingredient that goes into operating a successful business.

And remember, there is no such thing as a self-made man/woman. You will reach your goals only with the help of others. Get everyone involved. People in your company will understand and they will join you if you ask. Ask them to THINK!

If you increase you sales by 10%, cut expenses by 10% and improve your operating margins by 10%, what kind of business would you have during this downturn?

Albert Einstein said, “Imagination is more important than knowledge.” Use yours! THINK!