Finance

Staying Afloat in Times of Recession

Times are tight, there is no doubt about that. And times are changing, as well. The last similar financial upheaval was not only pre-Internet, it was pre-TV! So this is not something we have any recent experiences handling. While there are a number of “basic truths”, there is now an entirely different manner of living to take into consideration.

Some of the basics:

Cut basic business expenses to the bone. Do you really need a toll-free phone line? Will doing without actually cost in revenues? With all the Internet options do you need a separate fax line? How many employees will resign because you no longer supply bottled water?

Notice you need to weigh the results, not just scrap indiscriminately. You want to “slash and earn”, not “slash and burn”. Look at the Dues and Subscriptions line on your Profit and Loss sheets. Which are nice perks and which actually bring in revenue? While there, look at each line. Postage and Couriers? Does it really always have to be there before 10 the next day? Or will Second Day suffice?

Slashing utilities should be a goal. Simply “powering down” everything each night can result in some nice savings. There will be time for them to get started each morning as you prepare your first cup, instead of stopping by Starbucks on the way.

Are there any groups you can join that promote joint buying to lower members’ costs? From Chambers of Commerce to dedicate trade groups there are many formal and informal “buying groups” that can offer significant savings to members. Caution, make sure the savings outweigh any dues or fees that may be charged.

If you are handling and shipping products, where can you cut costs? Shipping materials may be an area. Are you re-using containers from your inbound shipments? Can you substitute crumbled newspapers for packing materials you are now buying? Can you pool your shipments with others locally to get better rates for all? Have you contacted a shipping consolidator to see if you can lower shipping costs?

Do you truly need new fixtures at this time? Will a bit of tape or glue keep something serviceable for another year or two? Yes, that steel shelving that clips together zip-zap would be nice, but cinder blocks and cut plywood make good shelving and are low cost, particularly if you buy “seconds”. And they will never, ever rust.

Keep in mind, you need to think in terms of survival, of being around this time next year, then the year after that. “Feel good” is gone, “make do for the present” is here and now. Which means that it is also mental. You and your employees have to approach each day with the idea “What can I do to preserve my job / business today”.

If you have employees and you do not have enough work to keep them busy all day think about shortening their hours or giving them a day or half-day off each week. Maybe stagger this through the entire staff, so everyone is carrying a proportionate share. As the boss, take a comparable pay cut yourself and let them know you have done so. With a 40 hour week, half a day equals 10% of a weekly pay, cut your own salary 10%, so “everyone is in it together”.

One place to not cut back is advertising and promotion. Do look very closely at the return you are getting for your spending in this area. Possibly move away from “image building” to specific product or service advertising, concentrating on spending only for things that can produce measurable results.

Support and customer service are another area to spare the ax. If anything, you want to improve here, if possible. It’s going to be survival of the fittest and you want your organization to be as lean and mean as possible, but not at the expense of losing customers.

Except, there may be a customer or two you would be better off without. Take this into consideration, as well. The one or two percent that cause ninety percent of the grief and require extra costs in order to please just them. It’s difficult for anyone in business to tell a customer to go elsewhere, but at times it should be done. Go through your customer list and any profitability reports you can generate and see if some pruning is necessary.

If things have slowed down a bit this might also be a good time for you or some staff to take a course or two. Learn from professionals how to streamline your procedures. If you’ve been operating by the seat of your pants, now might be a good time to learn strategic planning. If ever there was a time for it, it is now!

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