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Briefing Papers: Survival Tips in Difficult Times
(Written in May 2003)
We have been bravely trying to talk ourselves out of a recession. This is having an effect – but only to a point. You and I both know that times have become much tougher over the last year and, given the war and political environment, unless you are in the healthcare or education industries, there isn’t much hope on the horizon that things are set to change soon. With this in mind, we have prepared a few tips to help you survive the “non-recession”:
Look at your costs – You should be spending on service delivery, customer retention and customer acquisition – in that order.
- Review the management accounts line-by-line. Understand why you are spending each amount and challenge the way in which the amount is spent. Don’t just tinker with travel and entertainment; question all costs and investigate more efficient or different ways of doing things.
- Review your marketing budget – but be careful. Examine to results you have obtained for each type of spend and refocus on the most productive type of marketing.
- Review any non-critical business projects and shelve any that do not immediately contribute to the bottom line.
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Accommodation – do you still need all your space? Can you sub-let the excess?
Customers
- Are you carrying unprofitable customers – perhaps because they have prestigious names? (Remember to include the client maintenance cost and any finance arrangements used to cover longer than usual payment terms when working out whether they are profitable). Prestige is good but not if it drags you under.
- Are some of your customers having difficulties? Do not wait until they default on their payments to you before you review their ability to pay and revise any credit terms accordingly.
- Are any of your cost containment actions going to impact on your ability to service your good customers? If so you may end up reducing revenue as well as costs.
Competition
- Are your competitors having problems? Is there an opportunity to pick up clients they can no longer service?
- Are larger competitors contracting? Do they find a segment of the market uneconomical for them? Can you (with your lower overheads) service that market profitably?
Head count reductions
- Be sure you understand which aspect of your business will be impacted by any proposed reductions. Be particularly careful about reductions that will impact service delivery and/or customer retention. The best way to do this is to design better ways of doing things that reduces the manpower required – before making headcount reductions.
- Ensure you obtain legal advice before taking action regarding lay-offs – the last thing you want is to be involved in the monetary and time costs involved in a tribunal.
- Have you considered asking staff to accept reduced hours / salaries instead of lay-offs? Handled the right way this option could avoid the demoralising effect usually encountered where lay-offs have occurred.
Relationships
- Communicate with your lenders – inform them in advance of any expected down-turn and tell them what you are doing about it
- Communicate with your customers – they may accept reasonable changes in delivery patterns which may help you cope better
- Communicate with your suppliers – you may be able to obtain better payment terms. Remember they are also facing difficult times and will do as much as they can to keep you as their customer
Revisit your business strategy
- Identify the profitable products and focus on these
- Sell-off marginal or unprofitable divisions
- Do use professional help – but judiciously
| Irrespective of what strategies you adopt, be sure to bear in mind your end-game; it would be a shame to take actions that close-off too many growth options completely – recessions and/or downturns do not last forever!
Disclaimer: The information in this article is for obvious reasons generic in nature. You are advised to seek professional advice before implementing any of the above.
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