Get Smart, Chalk Out a new Path to Survive the Recession Tide
Date: Thursday , January 29, 2009
Hard times make it harder to borrow and business loans are often among the first to disappear. In today's market scenario money is tight; most of us would have definitely realized that by now. So, the question is how to stretch the rupee and make things work for us profitably and without ruffling too many feathers.
Managing recession, as we see it, has four stages:
*Maintaining cash flow (read cost cutting)
*Keeping employees and investors happy
*Leveraging the best resources available
*Filing for bankruptcy
The last item is clearly the last option and most avoided.
The first thing we have to understand is that the key objective here is to increase efficiency and maintain profitability. Hence, in a tight market situation decisions and financial plans are made everyday and not on the quarter to quarter basis.
Make Your Employees Hold your Hand
Keeping the employees happy and cost cutting exercises can actually go hand-in-hand if we play our cards smartly. Companies often panic and cut on trivials like the quality of the lunch, coffee, or the table napkin. While it saves much in terms of cash, it also has a direct impact on work as it lowers the morale of the employees and makes them restive. The last thing one should cause in a time like this, as this will lead to panic.
An alternative smarter option is to gear them up for more work and reward their performance and cost-effective efficiencies. The reward can be a simple certificate, an announcement, or a discount coupon.
Making your employees your partners and allies in work helps a lot to keep the company running. We can achieve this by giving dual ownership to people. For instance, someone in HR can also do administration as an add-on responsibility.
Get people to develop reports on "How to cut costs within the purview of their responsibilities" that are immediately doable; and implement them at once.
Implement Strategies that Keep the Cash Flowing in
Cash flow is the lifeblood of your business; to keep your business healthy, cash needs to continue flowing in. Thus the ability to sell in a bad market is enormously vital. Gear up your sales team to identify where to market and you direct the marketing team to develop a strategy on the how-to of marketing in the target segment cost-effectively. This is where the creativity of your marketing communications to the target segment plays a key role. Now no matter how tough the times get, having cash flow in to your business will never be a problem.
Redevelop your sales plan based on segmentation, depending on your capacity and capability and the geography based on the behavioral study of 'real customers'.
Develop and implement strategies to get your competition's customers. If your business must prosper in tough times, you need to continue to expand your customer base, and that means drawing in customers from the competition. And the best way to do this is by offering something more or something different than the competition does and talking about it to all and sundry.
Review Your Inventory Management Practices
Checkout what can be done to reduce inventory costs without sacrificing on the quality of goods or inconveniencing the customers. Ask yourself the questions "Am I ordering too many of any item?, Can an item be sourced somewhere else at a better price?, and Is there a drop-shipping alternative that will work for me, eliminating shipping and warehousing costs?"
Just because you've always ordered something from a particular supplier or done things in a particular way doesn't mean you need to continue the same way.
Keep Your Personal Credit in Good Shape
With everybody suspecting India Inc., it may seem harder to borrow and channels of business loans are often among the first to disappear. With good personal credit, you'll stand a much better chance of being able to borrow the money needed to keep your business afloat if you needed to. To recession-proof your business, keep a sharp eye on your personal credit rating as well as that of your business and do what's necessary to keep your credit ratings in good shape, transparent, and be proud to say "We are ready for your audit," whenever necessary.
There's absolutely nothing that can make any business one hundred percent recession-proof. But implementing the above practices to recession-proof your business will help ensure you survive the tough times and even be able to turn out a balance sheet showing