Business tips for surviving difficult times

By on June 18, 2013

As a business owner, you need to prepare for the changing economic climate.

With global economies currently being battered by Schumpeter’s ‘gales of creative destruction,’ many South African businesspeople are wondering: is this a slowdown, a downturn or a recession? How long will it last? How deep will it run? Will it be a soft landing, hard landing or crash landing? Well whichever way you look at it, the bottom line’s the same – the economy sure ain’t what it used to be.

Here are some top tips on how to guide your business through these uncertain times:

Cash Flow:

Put cash flow and financing on the agenda of every management meeting. Monitor your management accounts regularly to catch trends early, regularly update your cash-flow forecasts (building in base case and worst case scenarios) and perform KPI analysis. Cash is king so if you must choose between profitability and cash-flow, choose cash-flow.

Margins:

Focus on margins and cut costs, not prices. Remember mark-up is not margin. A price increase is the most powerful strategy to improve the bottom line but in tough times you may not get the benefits of a price increase easily. Instead you are faced with reducing your costs to help the bottom line. Hence stay focused on customers, not suppliers, as your margin source.

Customers:

Maintain your personal touch. When pressure to stay competitive is at an all-time high, you must be absolutely certain your customers are getting what they want and need. Don’t assume they’re happy just because they’re not complaining. Don’t be afraid to loose customers that don’t pay.

Accounts Payable, Receivable, and Inventory:

Wherever possible, negotiate a better deal with your suppliers. Review debtors lists and chase up overdue accounts. Closely control your inventory levels (dead stock stinks) and review your inventory insurance – theft increases in a downturn.

Advertising:

Don’t stop advertising. This is the time to capture the hearts and minds of consumers. If you cut advertising, you may lose your customers to your competition. Robust businesses increase advertising in a recession to win customers away from their competition.

Staff:

Look for creative ways to hang onto your top performers. You may not be able to offer nice salary increases but consider offering perks that don’t cost the company a lot of money (such as flexi-time and work-from-home options). If you need to cut staff costs, get rid of low-quality performers – they suck up a disproportionate amount of managers’ time, aggravate customers, squash morale, and drive away high-quality performers.

Operations:

Review and evaluate your company’s internal operations, strategic plans, procedures, process flows, organisational structure and policies to see how you can cut costs, reduce duplication of work, increase productivity and improve fiscal oversight.

Competition:

Investigate your competition and determine whether you can take advantage. While most businesses are battening down the hatches, a few brave companies will see this as an opportunity to get a leg up on their competition. Sure, you might not be as flush with cash as you were in the past, but neither is your competition. The advantage you build up now might be difficult for competitors to surmount later.

 

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