6 Tips to help your business make it through the tough times.
There is lots of advice being thrown around at the moment about how to help companies survive and prosper through tough times. However, the question is..."who is giving the advice". If you want advice you need to be speaking with someone with the right knowledge and experience to give it to you.
Economic downturns and recessions are the “winter” period in the economic cycle. This is the time when the "true mettle" of the business's CFO is put to the test to lay the foundation for the company to regroup and plan.
Truly great organisations even utilise the opportunities raised during tough periods to expand and grow.
As a start there are 6 Key elements which one should stand by:-
Don't Fumble in the Dark – it’s like driving at night with no lights. Can’t see a thing and very likely to drive into a parked car or a lamp post. How stupid would you look in front of your neighbours? Businesses need to have excellent visibility of their current performance and what is likely to happen over the coming months. Reporting of profitability and cashflow performance is essential as well as continually forecasting your future profit and cashflow forecast over the next 3-6 months. Many entrepreneurs consider the Management reporting information of a company is only something that the bank wants. Every entrepreneur needs to understand that this visibility is essential to navigate your way through the rocky waters that lie ahead. This visibility must be provided as quick as possible after the end of every month. The tip is to continually monitor how your business is performing and forecast how it will perform going forward. In this climate you will crash, if you cannot see where you are going.
Staff Skills and Culture – Periods of difficulty for a business puts enormous pressure on staff and management to manage the changes that are required to get through the turnaround period. You need to look at both the skills required to perform the key roles and implement the changes as well as the attitude of management to get others to buy into the solution. You have to determine whether staff have the stomach to fight through the tough role ahead and want to be part of the solution OR are they wanting to keep their heads low, moan to colleagues and generally be part of the problem. Next you need to see what roles are required going forward and define the skills and experience required for the roles. Potentially unprepared businesses may end up with a poor fit between good staff and the roles required. Frequently this is the balanced decision making that needs to be made in a successful downsizing programme. Having worked together to make the decision about who should stay and who should go, we would then work with you to put the plan into action, and address the remaining staff making it clear that “ we are sorry we have had to say good-bye to some of our colleagues but we are the team that will pull through the tough times – teamwork is everything now and we have to work together”. This creates the essential “can do” attitude – now get on with the plan. The tip is to plan the team going forward very carefully and match the attitude to change with the skills and experience required. Be decisive and try to do the downsizing cleanly.
Product Profitability – you need to look very closely at your product range, the sales volumes each product generates, the stock requirement, the gross profit, the terms with both the suppliers and customers and then rank the products in order of their ability to generate profit and positive cashflow. Having identified your best products you then need to honestly assess how demand for these products may be affected in a recession and whether the sales and marketing approach needs to be refined. The tip is to focus on your best products and possibly mothball products that soak up cash or fail to deliver profit.
Supplier Negotiations – Many businesses either have failed to develop effective procurement skills or sadly have forgotten how to use them. This is a skill that is essential during a recession. To be effective preparation is everything. One needs to research all available alternatives and carefully consider all the elements that are valuable to you as a customer and all the elements of that supply that are likely to be presented by the supplier as “valuable”. Contrary to popular belief successful negotiators are not aggressive, they are patient. The tip is to invest in your negotiation skills at the start of a recession. Payback is immediate and the consequences for poor negotiation are often catastrophic.
Customer Negotiations – Most entrepreneurs find it difficult to treat customer negotiations differently from supplier negotiations. The reality is that these skills are 2 sides of the same coin: whether you are negotiating with existing customers or potential new customers. You should expect your customer to have a list of requirements and you need to be prepared with your list of features and benefits against which you attach a value proposition and other terms that you are willing to “trade”. It is essential that you understand your competition and what their strengths and weaknesses are. Your customers will generally fall into 3 categories; quality buyers who think they will never get sacked for buying the leading brand, price buyers who think they will never get sacked for buying the cheapest offer and the balanced buyer who is trying to achieve the best value for money for the company. Many organisations also separate out the role of specifying what is required from the procurement function. If this is the case, the buyer has to buy what is specified for the best price. The tip is to invest in preparation. Buyers want to know you understand his needs whatever they are and you are prepared to work with that buyer to make him look good making the decision to chose you.
Obvious Threats – It always staggers us how many entrepreneurs believe that major factors in their market place will have no effect on their business. We firmly believe that a business should be honest with itself when the market turns. It needs a revised strategy to maximise its potential in a changing market and it needs contingency plan for when things go wrong – which they usually do. The competition will react in different ways, ranging from suicidal pricing or sticking their heads in the sand or even mothballing their businesses. The tip is not to ignore these obvious threats but to plan for them.
If you have these stable foundations in your business when others around you are floundering in the depths of despair, the adage of “patience is a virtue” will become self evidently true as great opportunities start to present themselves to the observant entrepreneur.
Know yourself and your Business Have you ever noticed two similar sized businesses that began operating in the same market with similar offerings, and yet only a few short years later one is thriving and the other is either floundering or closed, and wondered "why"? Research indicates that those businesses that prosper are those that truly understand themselves and are able to best express this through their organisation and the goods and services it provides. In business (and life) people like to deal with those that they "trust" and what people are searching for is authenticity, the old saying "People buy YOU, not your product" is as true now as it ever was.
Take the much used example of Apple their tagline is "Think Different" NOT "Great computers" or Nike "Just do it" NOT "Quality sporting goods" - now surely if you want to sell computers and sports wear you should be telling the world about your products, but the undeniable fact is that people buy into what "you" stand for, not simply the products and services that are being provided.
Knowing the importance of organisations being run inline with their core drivers and values we then sought a way to integrate this with the CFO consulting services that CFOCORP provides to support clients improve their businesses, and so the decision was made to partner with the team from Know your WHY (Australia) to help business owners, CEO's and Managing Directors uncover and connect with what truly drives them and their business, while also allowing the team from CFOCORP to continue to focus on providing their high quality CFO skills and services to small and medium sized businesses on a part-time and as-needs basis.
Our WHY is to "Contribute, add value and make a difference":- “Your Success is our Success”
Don’t you hate it when all of the “administrative and corporate stuff” gets in the way of you actually being able to focus on what’s really important in your business?
That’s where we can help, at CFOCORP we partner with and guide businesses and their owners, not only by working to maximise long term profits, and attending to the corporate issues such as HR and Insurance, but also by helping businesses “harness” their full potential and live their WHY.
Get further valuable advice for your business’s financial future. For more information please call or visit: (t) +61 (0)413 325 640 (e) firstname.lastname@example.org (w) www.cfocorp.com.au