Downturns: What To Do During Tough Economic
Times
By Tom Egelhoff
 One disadvantage of small towns is, when business
has a national downturn, it often hits small towns hardest. Because
of the smaller population base a rise in prices may cause customers
to re-think purchases or put them off until later.
How you react depends on the seriousness of the situation.
Sometimes you can just hang in and ride out the storm. If the
situation is really serious, then you may have to resort to drastic
action. Unfortunately the most drastic action is laying off some
employees. Not a pleasant experience. There is nothing worse
than losing a good employee who did nothing to deserve it.
Imagine you are swimming and suddenly a strong current starts
pulling you away from shore. If it carries you too far you may
not be able to get back. You know how to swim -- slow, methodical
strokes -- out of the current and then back to shore. But suddenly
panic sets in. You start to valiantly pound and kick against
the current. You begin to weaken. The harder you work the worse
it gets and you are swept away.
The same thing can happen in your business. The first step
is calming down and getting your business under control. It isn't
so much that you must get back to shore (economic safety) as
much as keeping shore in site and not going out any further.
Poor organization increases your chances of failure.
Here are some things to do when times are tough.
- If you don't already have a good accounting system in place,
make an appointment with an accountant and make sure you know
where you are financially.
- Make a complete analysis of the current strengths and weaknesses
of your business. What strengths can you capitalize on, what
weaknesses can you eliminate?
- You may need to consider an attorney to handle contacts with
unsympathetic creditors.
- If you are losing customers, try to identify the key problem
areas that are responsible and correct them.
- If you have been offering 30, 60, 90 day credit to customers
you may need to offer this service only to your best paying customers.
You can't afford slow paying customers. Tighten accounts receivable.
Ask customers to pay faster.
- Concentrate all spending to either increase sales or cut
costs.
- Conserve wherever you can to cover the costs of fixed assets.
Buildings, delivery vehicles, payroll etc.
- Resist the mistake of cutting expenses for promotional efforts
during slow periods. You need paying customers.
- Concentrate on core products and higher profit items.
- Eliminate vendors or middlemen not carrying their fair share.
- Completely review your purchasing systems and procedures.
- Sell excess inventory and equipment.
- Analyze cash flow on a regular basis. Daily if necessary.
- Can you reduce short term debt?
- Consider offering incentives to reward good sales efforts.
- Share promotional costs with other businesses or vendors.
- Obtain long term credit or investment partners.
How do you know when you're cutting to deeply?
Sometimes you can take a good thing too far. If two aspirin
are good, then 8 must be better. Here are some things to let
you know you're going too far.
- Customers complain they don't see your salesman often enough
and are trying your competitors.
- Employees are concerned about their situation and start discussing
company information with customers.
- Customer service complaints increase.
- Employee morale is low. Increased absentism.
- Sales people and other employees are reluctant to try new
ideas and become less aggressive in closing for fear of losing
sales.
When it really gets bad.
So, how bad can things get? We've all heard the stories of
business survival. Take control of the cash flow, sell company
cars, eliminate bonuses, call in credit cards, fire non-essential
employees, change the compensation system, change the management
system, and still try to keep as many good employees as possible.
Hopefully, you will never have to resort to these measures in
your business.
The bottom line is simply this. When you started your business,
you had a business plan. Once the business was up and running
you put the plan away and probably never looked at it again.
You should revise and renew your business plan every year. Revising
your business plan will force you to take stock of your business
and where you want to go. It will also keep you up to speed on
what's going on in the world that affects your business. I know
you don't have the time to do all this. Well my advice is to
make the time. When tough times come -- and they will -- you'll
be prepared.
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This article may be reproduced for your non-profit
group or organization provided it is not altered in any way and
the following is attached:
©1998 - 2004 Eagle Marketing PO Box 271 Bozeman, MT
59771-0271
http://www.smalltownmarketing.com - (406) 585-0219 - Toll FREE
(888) 550-6100
email: tommail@smalltownmarketing.com
Based in Bozeman, MT, Tom Egelhoff is the author of How To Market, Advertise & Promote Your
Business Or Service In A Small Town, and The
Small Town Advertising Handbook: How To Say More And Spend Less.
He is also a seminar and workshop presenter
and trainer. He may be reached at 888-550-6100 or PO Box
271 Bozeman, MT 59771-0271
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