Keep the belt tight in 2010
Principal at Berry, Dunn, McNeil & Parker
Your business has survived the recession. The economy has begun to turn around and as a manager or executive you are finally breathing a sigh of relief. You may be tempted to celebrate and relax. As a CPA and business management adviser, however, I have seen firsthand the fallout that comes from yielding to that temptation. It matters little whether your organization is a small mom-and-pop retail outlet or a large firm with $500 million in annual sales — letting up on the hard-won efficiencies that helped your company weather a downturn is akin to the dieter who loses a few pounds and then gains it all back by abandoning the very disciplines that helped shed the pounds. The business that slacks off on belt-tightening measures too rapidly can find fixed costs climbing and profit margins eroding. Bad business habits are as much of a danger to your company’s bottom line as a chocolate cake is to that dieter.
Examine every decision in light of its long-term impacts by asking such question as:
- If you focus on sales, do you have the production capacity to meet additional customer demand?
- If you hire up for that “one big client” will you be left with a bloated payroll and have to lay off workers if that customer disappears?
- If you purchase new equipment, what depreciation can you expect and at what capacity must the new machinery be used to justify the payback period?
Once your business is poised to survive the recession, here are some tips to thrive. For example:
- One of my small business clients instituted new inventory controls and streamlined their management reporting processes. Executives were so impressed that they made the “emergency” measures permanent. Today, this company has built a solid balance sheet.
- A prominent New England financial services company has documented millions of dollars in savings from implementing suggestions from frontline employees. Think twice before canceling those idea-generation programs or taking down those suggestion boxes.
- A New Hampshire company involved in making barcode labels and tags learned that putting customers’ needs first always pays off. Their website offered a comprehensive list of frequently asked questions and a glossary of the technical jargon used in their industry. Being customer-centric helped keep customers loyal and prevent them from being lured away by lower prices elsewhere.
Other best practices used to recession-proof your business can be used to keep it recession-proof:
- Plan to plan. A solid financial plan that includes debt that has to be paid off, as well as expenditures that can be eliminated or delayed, is essential.
- Use technology wisely. Investments in time and money savers don’t have to be extravagant. Little things — programmable thermostats to lower heating bills or new accounting software to trim the time it takes to balance the books — can keep yielding rewards once the economy turns.
- Tweak your business model and marketing. Try buffing up your brand. For example, sponsoring a community outreach program that reflects your company’s values can earn respect, increase name recognition and buy your firm a hefty dose of that priceless commodity called goodwill.
- Retain key talent. Can you afford to have a key player defect to the competition, costing you not only productivity losses but also the expense of hiring anew? To keep good people, offer challenges, rewards, communication and clear expectations at least equal to that of others in your market.
Going through a recession can be one of the greater learning experiences your company will ever have. Or, as has been said, if it doesn’t kill you, it makes you stronger.
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