A sluggish economy inevitably follows long periods of growth. When the economy slows, questions are raised about the operation of your business, for which there exists no comprehensive quick-fix. Governments the world over implement mechanisms to cushion shocks to our economy. However, the real action required must come from YOU. No one knows or cares about your enterprise as much as you do, so take advantage of opportunities during slow periods (yes – opportunities exist!) to emerge as a leader when things come right.
Enterprises can leverage competitive advantage in smart and decisive adaptability to a slowing economy. Take a giant leap back from day-to-day operations and self impose a rational-yet-vigorous evaluation. The following will offer some guidance through this process.
1. Visualise where you want to be
Remember the vision you had for your business? Revisit this, in combination with how you see it operating in 3 years time. Can you take advantage and employ technological innovation? Can you improve the way you operate? Can you improve the way you market your product and will you still be selling to the same customers? What resources will you require (including human resources) and will your current premises effectively accommodate your newly revived operations?
Maintaining status quo will leave you unprepared for changes likely to occur during downturns. To avoid being on the back-foot, take action now.
2. Review your activities
Now that you know where you want to be, scrutinizing your current situation will facilitate quick savings as well as plan for longer-term optimisation of costs. Begin this with a close review of your costs to ensure they are allocated efficiently – it’s easy to become relaxed about how money is spent when trading conditions are favourable. When things slow down closer cost control is essential.
Are your operations maximizing their efficiency potential? What are your competitors doing? With an idea of where you’ll be in 3 years time, consider investing in research and development, IT or new infrastructure now where you will likely get a better deal with less competition for resources. This will pay off once the economy shifts back into gear.
3. Count the beans
Pay close attention to your accounts receivable and payable – consider postponing unnecessary spending to focus on the inflow of cash and make your cashflow reporting more regular. It may be necessary to reduce trade credit, but certainly collect outstanding payments quickly to better facilitate the tracking of sales and management of stock.
How about your capital structure? Plan your funding needs and reinforce your capital funding relationships. Discuss your needs and secure funding well in advance of when it’s required.
Examine non-core and non-performing assets. Don’t wait for the market to ‘pick up’ to see non-performing assets earn their keep. They will just linger and be expensive in the long run.
4. Eliminate wastage and optimize your resources
You’ve visualized where you want to be, you’ve assessed your current activities and you’ve scrutinized your accounts. Now is the time to ‘trim the fat’ from your operations and take control of your businesses destiny.
Things you should do:
• Show leadership and retain the confidence of your customers, employees and suppliers.
• Maintain enthusiasm and keep your enterprise positive and energetic, always
• Complete a free Excellerator on-line business assessment here to identify your strengths and areas of risk within your enterprise
• Keep an eye out for opportunities to make deals, partner with other enterprises, design new pricing models, find new staff
• Apply for a free business mentor here
• Attend a free Enterprise North Shore Thriving in Tight Times workshop! Register here which will help you get a better perspective on what’s going on in the economy, what other enterprises are doing and the action YOU should take.
• Identify and monitor early warning indicators for future tight times and put contingency plans in place for the next one.
• Make good use of professional accountants, lawyers and consultants. Good advice will save you a lot of time and trouble. It is well worth the fee. Things can go horribly wrong if you don't consult professionals in good time.
• Above all - plan for the upturn in the economy
