How to Successfully Navigate Your Business Through an Economic Downturn

An economic downturn is a phase of economic cycle where the economy as a whole is in decline. This phase basically marks the end of the growth cycle. Economic crises are characterized by reduced levels of consumer purchases (especially of durable goods), and subsequently, reduced levels of production by businesses. While the economic downturn certainly be difficult, and they are huge obstacles for small companies looking to survive and grow, an economic downturn can open new opportunities. A well-managed company can realize the opportunity to gain market share with customers of their competitors. Resourceful entrepreneurs capture the available opportunities, from an economic downturn, by developing alternative methods of doing business that were never performed during a previous period of growth.

The challenge to bring your business to navigate through an economic downturn is to align your business with current economic realities. Especially if the entrepreneur, the need to renew a focus on core clients / customers, reduce operating costs, save money and manage more proactively rather than reactively, is paramount. Here are best practices that will help your company successfully navigate through an economic downturn: Goals: The primary goal of every entrepreneur is to survive the current economic crisis and the development of a leaner, more cost-effective and more efficient operation. The secondary objective is to grow the business, even in this current slowdown in economic growth. Objectives: • Conserve cash. • protection of resources. • Reduced costs. • Improving the efficiency. • Grow customer base. Request for action: • Do not worry … History shows that the economic downturn does not last forever. Stay calm and act rationally, if you focus your attention on resizing your company to the current economic conditions. • Focus on what you can control … Let the rhetoric of the media in recession and economic slowdown deter you from achieving business success. It’s a trap! Why? Because the state ’s economy is beyond your control. Surviving the economic downturn requires a focus on what you can control, i. e. relevant company. • Communicate, communicate and communicate! Beware the trap of too much alone. This is a difficult task indeed to survive and grow your business without your efforts. Ask questions and ideas to help other people (employees, suppliers, creditors, customers and consultants). Communicate with honesty and consistency.

Effective two-way communication is the key. • Negotiate, negotiate, and negotiate! The value of a series of strong negotiating position skills can not be overestimated. Negotiating better deals and contracts is an absolute must for reorientation and reduce your business with current economic conditions. The key to success is not only capable of a win-win approach in negotiations with all parties to develop, but also remember that you a favorable outcome for you. Recommended for best practice: the nuts and bolts … The following list of recommended best practices is vital to the survival of your business and growth during economic downturn. The actual financial health of its specific activity at the start of the economic downturn, determines the priority and urgency of the fulfillment of the following best practice activities.

1. Carefully monitor the cash flow: Forecast your cash flow monthly to ensure that expenditure and expenditure in accordance with claims. Including cash flow in your monthly financial reporting. Project cash requirements three to six months in advance. The key is the ability to control, protect, monitor and put money to work.

2. Note to convert your inventories: Convert excess, obsolete and slow inventory items into cash. Consider returning excess and slow objects back to the suppliers. Close-out or inventory reduction sales work and the size of your inventory. Also consider narrowing your product offerings. Good timing for placement helps to reduce excess inventory levels and occasional material shortages. The key is the amount of your inventory reduction without loss of revenue.

3. Timely collection of your debts: this asset to be converted into cash as quickly as possible. Offer prompt payment discounts to encourage timely payments. Changes to terms of sale for slow paying customers (ie changing net 30 days COD). Invoicing is an important part of managing your cash flow. The first rule of invoicing is to this as soon as the goods are shipped and / or after services are delivered to do. The emphasis on reducing billing errors. Most customers delay payments because of invoice errors, and will not pay until you receive a corrected copy. E-mail or fax invoices to save on the time of mailing. Enter payments you received and make deposits more frequently. The key is to develop an efficient system to collect timely payments and one that you generate advance of problems.

4. Re-focus your attention on your existing clients / customers: Make customer satisfaction your priority. Periodic review of your customer buying history and frequency of purchases can reveal some interesting facts about the purchasing habits of customers. Consider signing long term contracts with your core clients / customers which will add to your security. Provides a discount for cash advance. The key is to do what is necessary to keep your current customers loyal.

5. Re-negotiate with their suppliers, lenders and landlord: i) Suppliers: Always keep your negotiations on the level of need, say your company has reviewed its cost structure and has determined the need for lower cost supplier. . Tell the seller that the value of the relationship they have developed, but you should receive an immediate cost.Ask your supplier for a lower material price, a longer payment cycle, and lifting the financial burden. Also see if you can buy material from them on a consignment basis. In return for their price concessions, be prepared for a long term contract to accept. Explore the idea of bartering as a form of payment. ii) Lenders: Everything in business finance is negotiable and your relationship with a bank is no exception. The first step to successful renegotiations is to your lenders to convince that you can eventually pay the renegotiated mortgage. It should be recalled to your lenders why it would be in their interests to accept a new agreement. Showing them your business plan and an action plan that includes cost savings initiatives, with the “how” and “when” the implementation of the plan is the best way to achieve this goal. Explain to them you need their cooperation to ensure that we can survive, and, growing your business during the economic downturn. Negotiated Procedure items include: interest rate, collateral required to cover the loan, and the start date for a refund. A start date for repayment could be immediate, within several months or up to one years. The key is to realize that the provider will work with you, but that frequent and continual communications with them is crucial. iii) Landlord: Meet the master of the house. Explain your need to have them the life of the lease extension at a reduced price. Make sure you have a clause in the lease, which entitled the right to lease all or any space rented does.

6. Reassess staffing requirements: This is a very critical. Salaries / wages are a major cost of doing business. Therefore, any reduction of working through changes in the work program, short-term layoffs or permanent dismissal has an immediate cost benefits. Most companies ramped up hiring new employees in good times, only to discover that they have become redundant due to slow sales during the economic slowdown. In terms of size your staff very carefully to the staff reduced to a level that forces you to skimp on customer service and quality. Consider the use of part of the current trend of outsourcing certain functions to independent contractors.

7. Shop for better insurances rates: Get quotations from other insurance agents for comparable coverage to determine whether your insurance company that is competitive. Also consider revising your coverage to reduce the cost of premiums. The key is to have the right balance must be adequately insured, but not under or over insured.

8. Re-evaluate your advertising: Contrary to what the other cost cutting initiatives, evaluate the possibility of advertising expenditure. This tactic realizes the advantage of reducing the “noise” and congestion advertisers (not) in the market. The period of crisis an opportunity to increase awareness and demand for additional products / services offered.

9. Get help from external consultants: the use of an advisory committee consisting of the CPA, lawyer and business consultant offers objectivity and provides advice and career guidance. Their collective experience in working with similar situations in the recent economic downturn is invaluable.

10. Review other expenses: Target-one relationship between the cost of cutting edge initiative of 10-15%. Attempt to unnecessary costs. Tightening of the belt to the crisis to address the practical, financial sense. Proactively managing your business through an economic downturn is an enormous challenge and is essential for survival. However, through well-planned initiatives, an economic downturn can create tremendous opportunity for your company a greater market share. To benefit from this growth opportunity, you must act quickly to implement best business practices to continue refocusing and resizing your company to the current economic conditions.