Surviving the Current Financial Situation
In the current climate of near certain worldwide economic meltdown there are many organisations who will not survive. There are some who will not only survive but will benefit from the misfortune of others. However for the majority it is a question of surviving and getting through it. If your business is on a sound financial footing and you have reserves in the bank (Providing your bank is not one that has gone under!) then this will be beneficial in the coming months. So we are back to good old cash flow and monitoring of the financial position.
You may even be able to reduce employee salaries for a period of time, rather than lay-offs, with a promise of bonuses when things recover. This is what JCB in Britain have done recently.
Tighten your Belt – Eliminate Extravagent Spending
Cut out unnecessary spending, no perks on the business such as dinners to woo customers. They rarely actually need it if your business is offering honest value for money and top class services, and in most cases customers and prospects will appreciate you being prudent if it means you stay in business and continue as their valued suppliers. In the past there was no such thing as ecommerce web design and look what the Victorians did with the limited resources they had at their disposal.
Directors lead the way by paying yourself less and tighten your own belt. There is nothing worse than asking other people to manage on less when you don’t yourself.
Avoid buying anything unless you absolutely have to. It’s amazing how you can manage without for a period of time by using up existing stocks and making sure that waste is reduced to an absolute minimum.
Look for Bargains in Purchasing.
When you do have to procure goods to run the business, make sure you look out for bargains or negotiate for a better deal than you may have achieved previously. When times are tough, sales with no profits are better than nothing and there are some good deals to be had. One company I recently heard about sold a house for half the price when a customer came along with a cash offer. Part of providing guaranteed SEO services requires that we host websites too, and we were spending quite a lot on this each year, so by consolidating various accounts we slashed the annual hosting costs by over 50%.
By reviewing all of your business overheads you will be able to identify areas similar to ours where you ordinarily spend a fair amount of your revenue and profits and it is not until there is an economic downturn or some loss of business that you question if that spending is really necessary. So in many ways the current economic climate is a good thing, and most really successful businesses realise this and constantly review costs, even when times are good.
Do Your Customers have Financial Liquidity?
Find out the financial viability of your best customers. When the income of a customer falls then their ability to purchase goods and services is affected. If they are able to pay, then you will be able to pay your suppliers. There is nothing worse than doing a lot of work or selling a lot of stock to customer and then not getting paid. Situations like this can often cost you money, and that is the road to financial ruin, so be sure to be aware of your client’s economic situation as best as possible. We use the free Dunn and Bradstreet financial tracking service to identify any negative changes registered against any of our major clients
One of our customers who are a team of chartered planning consultant had a very large customer go into liquidation owing about £10,000. This was a lot of money to lose, but they survived because their business was very healthy with positive cash flow.
Don’t Borrow Money
When the world is in a financial meltdown it is better not to borrow money if you can help it. If you have already borrowed significant sums of money then make sure you talk to your bank and get the best deal on repayments you can. If it’s possible to repay a chunk of money do so to reduce the interest you are paying out. To me interest is money going out for nothing in return and this is not good money management. Having said all that, the interest rate in America is just over 1% and recently rates have been radically reduced in the UK. But that in itself is what caused this whole financial mess in the first place. People borrow money cheaply then re-lend it at a higher rate of interest and take the difference in profit. Once the interest rate rises to a more normal level they will bail out and take their billions off to buy an island somewhere while everyone else pays the price.
Stay in a Positive Mode
By this I do not mean be in denial and pretend the world is not going through a financial challenge. But if you are continually thinking and worrying about the negative aspects of the financial situation, then you are likely to make it come true. Don’t forget you get what you wish for and by concentrating on something then it will work like a wish, so why not concentrate on ways of getting new customers, giving better value to your existing customers and how your company could offer new products or services to your existing customer base?
You Only Have to Survive
The world financial situation at the moment, I realise, is much more complicated than is indicated above. But the simple ways of dealing with crisis can often be the best option. Cut everything down to the bone and think about the days when people did not have such complicated lives. They managed their businesses without an advisor for tax advice , a water cooler, coffee machines and other such luxuries that we often take for granted. They made do by either doing extra work themselves or just going without. Obviously as your business grows, or recovers, it doesn’t become economically viable to sit and trawl through tax return forms or to have to do a lot of extra research and administration yourself, so you can restore those facilities that help to make you money once you have recovered your initial position.
Conclusion
Now I am not suggesting that we should go back to the good old days. What I am saying is that we might think we can’t manage without all our latest gadgets but the reality is that we can do more with a great deal less, as long as we put ourselves into the right frame of mind and think positively about what we can achieve rather than what we haven’t got. Good luck for a prosperous future.
This entry was posted on Wednesday, September 30th, 2009 at 4:21 am and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.