part0009

T he previous chapters provided initial thoughts on surviving in an economic crisis. Once the business is stabilized and the move toward thriving is addressed, consider these thoughts below from noted business experts.

There are two schools of thought when times are tough and the future is uncertain. One says that businesses should cut expenses and prepare to ride out the economic storm. The other says that the period of disruption may be the best time to take positive steps and prepare for brighter days ahead. A combination of both really is the best strategy . In bad times, businesses in general should cut expenses and terminate marginally productive employees. (These are hard decisions to make. But they are both needed and important.) Now may be the time for you to take these actions unless there are overriding reasons via a government program or a future skills gap that must be addressed.

Let’s take a look at some cost-saving measures that may provide the funds to build for the day when the distressing economic period is over.

If you want and need some cash flow relief, ask for a ninety-day “rent holiday.” (Offer to make up the rent over an eighteen-month period.) If your cash flow permits and you need commercial space for your future plans, now may be a good time to talk to your landlord about a favorable extension of your lease or some leasehold improvements.

Focus on things that might help the business provide better services, and so on. If the business is easily movable and your current lease is nearly up, make a move now to obtain favorable lease terms. Or, perhaps you have too much space. Try to convince the landlord to take it back, revise the lease, and deduct the rent currently due. Your objectives are to ask for help to survive and to optimize the space needed to thrive.

Operating space expenses have a direct bearing on your cash flow break-even point. Lowering these expenses will improve the foundation building picture and buy you time to implement your thrive change plans.

Check into your medical and other insurance coverages. The cost is going nowhere but up; however, many insurers offer money-saving options. For example, a higher deductible may greatly reduce your premiums. Economically distressed periods are good opportunities to take a look at all your insurance programs, to reduce costs, lower your cash flow break-even point, and to better match the coverage with risks you have. Put your insurance agents to work for you.

Talk to your largest suppliers. Maybe they are willing to give you a better break on price or terms now that they see you as a survivor. In a down market, they need business and will want to solidify their customer base. Ask for an early payment discount of 4% or 5% if your anticipated cash flow permits. These types of terms can put you ahead of the competition and keep you there. (Every small increment in increased margins boosts your survival quotient.)

Your leading vendors can also be an excellent source of up-to-date market knowledge. Be sure to ask for their input and whether they can provide low-cost or no-cost marketing or advertising support. They want you to succeed so you can pay them and help them grow over time.

If your business accepts credit card purchases, speak to the bank that processes them for you. See if they will reduce the percentage they take. Offer discounts to your customers for cash payments if it makes good sense.

Take a look at all your expenses. Can you cut them by ten percent or more without really affecting your business? After you have considered all of the above suggestions, turn your thoughts toward the positive side. Maybe now is the time to take aggressive measures to increase business revenues. After all, your competition is cutting back and downturns do not last forever. By reacting positively, your business may not only improve today, it will also have a head start on tomorrow. (These steps assume you can get an early indication on how to reposition your business in a changing marketplace.)

You can probably get good advertising deals in a slow economic period, so here is your opportunity to increase market penetration. Challenge your staff to find and use low-cost, no-cost marketing methods. Don’t let anyone forget that the digital age is here. Press for effective and creative uses of all marketing channels with an emphasis of “online” activities. (This effort toward on-line sales and the resulting changes may become big parts of any corporate repositioning you might undertake as you develop your longer-term marketing plans.)

In your advertising and in your marketing across the board, remember that the key to survival for many small and mid-sized businesses is service. By emphasizing quality and service, your business will not only survive in a recession, but will boom in the good times as well.

If you need a crackerjack salesperson or another key employee, do not be reluctant to hire one now. There are always plenty of good people out there who are unemployed or underemployed in a depressed market. Also, do not forget about that whole group of talented (but inexperienced) college graduates searching for jobs in an inhospitable marketplace. By hiring that much-needed salesperson or key technical person, you will give your business just the jump-start it needs to stay on the road to survival and success!

Every advisor tells you to do this. Now is the time to find your niche! The bigger businesses get, the more voids they leave. When large businesses cut back, they produce even more and bigger holes in the business-world fabric. Change and expand your business to fill one or more of those holes.

Once you are operating at cash flow breakeven, it may be the moment to add a new product line or service. Every company in a difficult market is looking for new business. You may be able to strike a uniquely favorable arrangement with new suppliers. (Ask for special terms to build inventory without impacting your cash flows.) If you can do this, you will also be a step ahead of competitors who are waiting for the tide to turn.

“It was the best of times; it was the worst of times.” Dickens was referring to a revolution instead of a temporarily disrupted economy or a longer recession. His words are still a good tagline for a disrupted independent business scene.

When you look back at a particularly difficult time, it may well go down in history as the era when investors should be buying small-to-medium-sized businesses. Maybe the best reason yet to look at a business combination is to add changes in order to survive. The fact that business prices are and may stay depressed for a while should not be the driving factor. You want to look only at ways to add to your product line and/or marketing strength. (However, do not neglect to fully assess all the factors outlined in other chapters.)

If you are considering or need to move into a business model with an emphasis of online sales or “virtual service delivery,” acquisition of a struggling company with the needed human resource assets and technical attributes may be in order. This is the standard “buy or build” debate.

You may be able to accomplish an acquisition with little or no cash if you are willing to take a target’s debt position. (You might even be able to negotiate with their lender to take over the debt at a discount if you can pay part of it down.)

Do not expect there to be much commercial financing available beyond survival support. When it comes to seeking acquisition financing in difficult times, by far the best sources are friends, relatives, and your business “networking” contacts. You can find more about how to approach an acquisition as a thrive strategy in Appendix C.