Avoid the bunker-down mentality......

"As publised in the Western Sydney Business Access Magazine, October 2011 Edition"

The uncertain and challenging conditions that business owners currently find themselves operating in throws up the question of ‘what is the best way to navigate through these tough times?’

In many cases business owners bunker down, close the hatch and take a month by month approach. But this isn’t the most effective approach.

Obviously there needs to be immediate attention paid to critical areas to ensure short term survival but this needs to be coupled with mid range and long range thinking and planning to ensure that the business is still positioned well for the future.

Drawing on concepts covered in a previous article, the key to surviving the downturns is planning. Those owners that have an effective business plan would have the risk management policies listed to help them manage the tough times.

So the first step is to revisit your business plan. This is the plan covering the short, medium and long term goals and if for nothing else will help business owners to remain focused on achieving their desired goals.

From this detailed plan and its desired outcomes, a strategy for the tough times can easily be developed and put in place. This ensures that this new short term strategy remains in-tune with the larger and long term strategy.

Next, get the customer focus right. The focus on and delivery of goods and services to core customers needs to remain effective to preserve cash inflows. Whilst at the same time the ‘firing’ of unprofitable and difficult customers can also assist with easing cashflow constraints.

As well as the review of existing customers, sometimes a shift in market conditions can throw up new opportunities as other businesses fail. Business owners need to be on lookout for similar or complimentary markets that they could enter to generate new revenue streams.

Staffing levels are an obvious area where cutbacks can occur during tough times. But this needs to be carefully managed. If a business lets go of key staff to save money, is the business effectively limiting its opportunities for growth come the eventual upturn in the market?

Another obvious area to review is suppliers. Are the best prices being obtained? Is the business able to take advantage of early repayment discounts? Is the business holding too much stock and effectively tying up cash?

The final expenditure area for review is general operating costs. Discretionary spending must be controlled and much like suppliers, time should be allocated to ensure that the best prices are being obtained and money isn’t being wasted.

Moving away from focusing on cash flows, another important tool is to begin to or continue to communicate. Communicate to staff about the downturn and the measures being taken to ensure survival.

Communicate with suppliers and other creditors to ensure they are aware that the business is going through tough times and explain the measures being put in place to address any cashflow issues.

Finally, once all of the strategic planning has been done, the business owner needs to ensure that the culture of the business is aligned to the ‘tough times’ strategy to enable it to be realised. This may require a shift in culture either for the short term or maybe even for the long term.

With all changes to a business’ strategy, whether short term or long term, the business owner needs to follow though with the changes. Everyone involved within the organization will look to the owner for leadership in tough times and it is critically important for the owner to be the champion of change.