Jul 25, 2008
How to successfully navigate their business through an economic recession
By: Zack
An economic recession is a phase of economic cycle in the economy as a whole is being decline.This basically marks the end of the period of growth in the economic cycle. Economic recession characterised by a decrease in levels of consumer purchases (especially of durable goods) and subsequently reducing production levels by companies.
While economic activity are certainly challenging, and are formidable obstacles to small businesses that are trying to survive and grow, an economic recession can open opportunities. A good business can realize an opportunity to increase their market share by taking customers from their competitors. Ingenio entrepreneurs capture the opportunities available, from an economic recession, by developing alternative methods of doing business that were never implemented over a period of growth prior.
The challenge of successfully navigate their business through an economic recession is the realignment of its business with current economic realities. Specifically, you as a business owner, the need to renew special attention to its major clients / customers, reduce their operating costs, conserving cash, and manage more proactively, rather than reactive, is paramount .
Here are the best practices to help you successfully navigate your business through an economic recession:
Objectives:
The main goal of any entrepreneur is to survive the current economic downturn and develop a leaner, more profitable and more efficient operation. The secondary objective is to grow the business, even during the current economic downturn.
Objectives:
• Keep in cash.
• Protect assets.
• Reduce costs.
• Improve efficiency.
• a growing customer base.
Action required:
• Do not panic… History shows that economic recessions do not last forever. Stay calm and act rationally as you focus on changing the size of your business to current economic conditions.
• Focus on what you can control… Do not let the media rhetoric regarding recessions and the economic slowdown that deter achieving business success. It's a trap! Why? Because the condition of the economy is beyond their control. Surviving economic recessions requires a focus on what you can control, namely its commercial activities involved.
• Communicate, communicate, and communicate! Beware of the trap of trying to do too much on their own. It is a difficult task indeed to survive and to grow your business exclusively with their own efforts. Request ideas and seek help from others (its employees, suppliers, lenders, customers and advisers). Communicate honestly and consistently. Effects two-way communication is the key.
• Negotiate, negotiate and bargain! The value of a solid set of negotiation skills can not be overlooked. Negotiating better deals and contracts is an absolute necessity to adjust and resize your business to current economic conditions. The key to success is not only knowing how to develop a win-win approach in negotiations with all parties, but also taking into account the fact that you want a favourable outcome for you too.
Recommended best practice activities:
The nuts and bolts… The following list of best practices activities is critical to your business "for the survival and growth during an economic recession. The real financial health of their business particularly at the beginning of the economic recession, will dictate the priority and urgency of implementing the following best practices.
1. Diligently monitor their cash flow: Forecast their monthly cash flow to ensure that expenditures and planned expenditures are consistent with the accounts receivable. Include cash flow statements in its monthly financial reporting. Project cash requirements for three to six months in advance. The key is knowing how to monitor, protect, control and put cash to work.
2. Carefully turn their inventories: Converting excess, obsolete and slow-moving inventory items in cash. Consider the possibility of returning excess and slow-moving items back to suppliers. Close-out or reduction of inventories of sales work well change the size of its inventory. Also, consider reducing its product offerings. Good time for placement helps reduce excess inventory levels, and sometimes the scarcity of material. The key is to reduce the amount of inventory without losing sales.
3. The timely collection of accounts receivable: This asset must be converted into cash as soon as possible. Provide prompt payment discounts to encourage timely payment. Make changes in the conditions of sale for slow paying customers (ie, the net change of 30 days terms COD). The billing is an important part of their cash flow management. The first rule of invoicing is doing as soon as possible after products are shipped and / or after services are delivered. Place emphasis on reducing billing errors. Most customers delay payments because he had an invoice for mistakes and, therefore, will not pay until they receive a copy corrected. E-mail or fax their bills to save time by mail. Post payments he has received and make deposits more often. The key is to develop an efficient collection system that generates payments on time and that gives notice of the problems.
4. Re-focus on their customers and existing customers: customer satisfaction Make your priority. A periodic review of their clients buying history and frequency of purchases can reveal some interesting facts about their customers buying habits. Consider signing long-term contracts with its major clients / customers to add to their safety. Offering a discount for cash payments in advance. The key is to do what it takes to keep their current customers loyal.
5. Re-negotiate with its suppliers, lenders and owner:
i) Providers: Always keep their negotiations on the level of need, saying that his company has reviewed its cost structure and has determined that it is necessary to reduce the costs of suppliers. . Tell the vendor that you value the relationship they have developed, but you need to get cost reductions immediately. Ask your provider for a lower price material, an extended payment cycle, and the elimination of finance charges. Also, see if you can buy material in them a lot. In exchange for their concessions price, would be willing to accept a long-term contract. Explore the idea of barter as a form of payment.
ii) Lenders: Everything in corporate financing is negotiable and its relationship with a bank is no exception. The first step for the success of renegotiations is to convince its lenders that you can pay ultimately renegotiated loans. You must draw its lenders why it would be in their best interest to reach an agreement on a new agreement. Showing them your business plan and its action plan which includes the cost savings initiatives, along with "how" and "when" of implementing its plan is the best way to achieve this goal. Explain to them that you need their cooperation to ensure that it can survive and, grow your business during the economic recession. Negotiated topics include: the interest rate, the security needed to cover the loan, and the starting date for repayment. A starting date for repayment could be immediate, within several months or up to one year. The key is to realize that your lender will work with you, but frequent and continuous communication with them is essential.
iii) Owners: Meet with your landlord. Explain your need for them to extend the term of its lease at a reduced cost. Make sure you have a clause in the lease that entitles you to have the right to sublease all or part of the leased space.
6. Re-evaluate its staffing needs: This is a very critical area. Wages and salaries represent a major expense of doing business. Therefore, any reduction in working hours through changes in working hours, short-term layoffs of permanent staff or has a cost saving benefits. Most companies increased hiring of new employees in good times, only to find that they are currently too due to slow sales during the economic recession. In terms of down-sized its staff, be very careful not to reduce its staff to a level that forces you to skimp on customer service and quality. Consider the use of part-time or the current trend of outsourcing certain functions to independent contractors.
7. Shop for the best types of insurance: Get quotes from other insurance agents for coverage comparable to determine whether or not their current insurance company is very competitive. Also, consider reviewing their coverage to reduce costs of premiums. The key is to have the right balance to be adequately insured, but not under or over insured.
8. Re-evaluate your advertising: Unlike the other cost-cutting initiatives, evaluating the possibility of increasing the cost of its advertising. This tactic is aware of the advantage of reducing the "noise" and congestion (fewer advertisers) on the market. The period of recession a great opportunity to raise brand awareness and create a greater demand for your product / service we provide.
9. Seek the assistance of outside counsel: The use of an advisory board composed of its CPA, attorney, business consultant and offers objectivity and provides professional advice and guidance. Their collective experience in working with similar situations in previous economic downturns is very valuable.
10. Check your other expenses: Target an across-the-board cost-cutting initiative of 10-15%. Attempt to eliminate unnecessary expenditures. Tightening their belts in order to weather the recession makes practical financial sense.
Proactive in managing their business through an economic recession is an enormous challenge and is essential for their survival. However, either through planned initiatives, economic recession can create enormous opportunities for his company to gain greater market share. To seize this opportunity for growth, must act quickly to achieve those objectives best business practices to continue and resize realignment of its business to current economic conditions.
By: Zack
An economic recession is a phase of economic cycle in the economy as a whole is being decline.This basically marks the end of the period of growth in the economic cycle. Economic recession characterised by a decrease in levels of consumer purchases (especially of durable goods) and subsequently reducing production levels by companies.
While economic activity are certainly challenging, and are formidable obstacles to small businesses that are trying to survive and grow, an economic recession can open opportunities. A good business can realize an opportunity to increase their market share by taking customers from their competitors. Ingenio entrepreneurs capture the opportunities available, from an economic recession, by developing alternative methods of doing business that were never implemented over a period of growth prior.
The challenge of successfully navigate their business through an economic recession is the realignment of its business with current economic realities. Specifically, you as a business owner, the need to renew special attention to its major clients / customers, reduce their operating costs, conserving cash, and manage more proactively, rather than reactive, is paramount .
Here are the best practices to help you successfully navigate your business through an economic recession:
Objectives:
The main goal of any entrepreneur is to survive the current economic downturn and develop a leaner, more profitable and more efficient operation. The secondary objective is to grow the business, even during the current economic downturn.
Objectives:
• Keep in cash.
• Protect assets.
• Reduce costs.
• Improve efficiency.
• a growing customer base.
Action required:
• Do not panic… History shows that economic recessions do not last forever. Stay calm and act rationally as you focus on changing the size of your business to current economic conditions.
• Focus on what you can control… Do not let the media rhetoric regarding recessions and the economic slowdown that deter achieving business success. It's a trap! Why? Because the condition of the economy is beyond their control. Surviving economic recessions requires a focus on what you can control, namely its commercial activities involved.
• Communicate, communicate, and communicate! Beware of the trap of trying to do too much on their own. It is a difficult task indeed to survive and to grow your business exclusively with their own efforts. Request ideas and seek help from others (its employees, suppliers, lenders, customers and advisers). Communicate honestly and consistently. Effects two-way communication is the key.
• Negotiate, negotiate and bargain! The value of a solid set of negotiation skills can not be overlooked. Negotiating better deals and contracts is an absolute necessity to adjust and resize your business to current economic conditions. The key to success is not only knowing how to develop a win-win approach in negotiations with all parties, but also taking into account the fact that you want a favourable outcome for you too.
Recommended best practice activities:
The nuts and bolts… The following list of best practices activities is critical to your business "for the survival and growth during an economic recession. The real financial health of their business particularly at the beginning of the economic recession, will dictate the priority and urgency of implementing the following best practices.
1. Diligently monitor their cash flow: Forecast their monthly cash flow to ensure that expenditures and planned expenditures are consistent with the accounts receivable. Include cash flow statements in its monthly financial reporting. Project cash requirements for three to six months in advance. The key is knowing how to monitor, protect, control and put cash to work.
2. Carefully turn their inventories: Converting excess, obsolete and slow-moving inventory items in cash. Consider the possibility of returning excess and slow-moving items back to suppliers. Close-out or reduction of inventories of sales work well change the size of its inventory. Also, consider reducing its product offerings. Good time for placement helps reduce excess inventory levels, and sometimes the scarcity of material. The key is to reduce the amount of inventory without losing sales.
3. The timely collection of accounts receivable: This asset must be converted into cash as soon as possible. Provide prompt payment discounts to encourage timely payment. Make changes in the conditions of sale for slow paying customers (ie, the net change of 30 days terms COD). The billing is an important part of their cash flow management. The first rule of invoicing is doing as soon as possible after products are shipped and / or after services are delivered. Place emphasis on reducing billing errors. Most customers delay payments because he had an invoice for mistakes and, therefore, will not pay until they receive a copy corrected. E-mail or fax their bills to save time by mail. Post payments he has received and make deposits more often. The key is to develop an efficient collection system that generates payments on time and that gives notice of the problems.
4. Re-focus on their customers and existing customers: customer satisfaction Make your priority. A periodic review of their clients buying history and frequency of purchases can reveal some interesting facts about their customers buying habits. Consider signing long-term contracts with its major clients / customers to add to their safety. Offering a discount for cash payments in advance. The key is to do what it takes to keep their current customers loyal.
5. Re-negotiate with its suppliers, lenders and owner:
i) Providers: Always keep their negotiations on the level of need, saying that his company has reviewed its cost structure and has determined that it is necessary to reduce the costs of suppliers. . Tell the vendor that you value the relationship they have developed, but you need to get cost reductions immediately. Ask your provider for a lower price material, an extended payment cycle, and the elimination of finance charges. Also, see if you can buy material in them a lot. In exchange for their concessions price, would be willing to accept a long-term contract. Explore the idea of barter as a form of payment.
ii) Lenders: Everything in corporate financing is negotiable and its relationship with a bank is no exception. The first step for the success of renegotiations is to convince its lenders that you can pay ultimately renegotiated loans. You must draw its lenders why it would be in their best interest to reach an agreement on a new agreement. Showing them your business plan and its action plan which includes the cost savings initiatives, along with "how" and "when" of implementing its plan is the best way to achieve this goal. Explain to them that you need their cooperation to ensure that it can survive and, grow your business during the economic recession. Negotiated topics include: the interest rate, the security needed to cover the loan, and the starting date for repayment. A starting date for repayment could be immediate, within several months or up to one year. The key is to realize that your lender will work with you, but frequent and continuous communication with them is essential.
iii) Owners: Meet with your landlord. Explain your need for them to extend the term of its lease at a reduced cost. Make sure you have a clause in the lease that entitles you to have the right to sublease all or part of the leased space.
6. Re-evaluate its staffing needs: This is a very critical area. Wages and salaries represent a major expense of doing business. Therefore, any reduction in working hours through changes in working hours, short-term layoffs of permanent staff or has a cost saving benefits. Most companies increased hiring of new employees in good times, only to find that they are currently too due to slow sales during the economic recession. In terms of down-sized its staff, be very careful not to reduce its staff to a level that forces you to skimp on customer service and quality. Consider the use of part-time or the current trend of outsourcing certain functions to independent contractors.
7. Shop for the best types of insurance: Get quotes from other insurance agents for coverage comparable to determine whether or not their current insurance company is very competitive. Also, consider reviewing their coverage to reduce costs of premiums. The key is to have the right balance to be adequately insured, but not under or over insured.
8. Re-evaluate your advertising: Unlike the other cost-cutting initiatives, evaluating the possibility of increasing the cost of its advertising. This tactic is aware of the advantage of reducing the "noise" and congestion (fewer advertisers) on the market. The period of recession a great opportunity to raise brand awareness and create a greater demand for your product / service we provide.
9. Seek the assistance of outside counsel: The use of an advisory board composed of its CPA, attorney, business consultant and offers objectivity and provides professional advice and guidance. Their collective experience in working with similar situations in previous economic downturns is very valuable.
10. Check your other expenses: Target an across-the-board cost-cutting initiative of 10-15%. Attempt to eliminate unnecessary expenditures. Tightening their belts in order to weather the recession makes practical financial sense.
Proactive in managing their business through an economic recession is an enormous challenge and is essential for their survival. However, either through planned initiatives, economic recession can create enormous opportunities for his company to gain greater market share. To seize this opportunity for growth, must act quickly to achieve those objectives best business practices to continue and resize realignment of its business to current economic conditions.
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