Archive for July, 2009

6 Tips for Managing in Recessions

Sunday, July 26th, 2009

Despite what the media suggest, the recession will not lay waste to every company and household in Canada. Some will be seriously affected and my sympathy lies with them. However, for most of us the impact will be bearable. We know from experience that there are things you can do to mitigate, even minimize, the impact of a recession and articles containing tips and suggestions are already becoming quite common. Here are 6 of what I consider to be the most valuable ideas from the articles I’ve read recently.

Tip # 1. The best time to look for money is before you need it, so make contingency plans now. Do a spreadsheet analysis of the impact of a 5 or 10% decline in sales on your cash flow. Go and talk to your Bank, they’re tightening their terms and restrictions already but they will work with you if you’re a good customer. It’s also a good idea to build a relationship with a second Bank, if you haven’t already done so.

Tip # 2. Look inside the company for cash, for example….can you renegotiate payment terms with your suppliers to avoid borrowing money to pay them? Or will they give you a discount for cash payments? Can you trade off extended lead times, less than 100% fill rates, variable (but not unacceptable) product or service quality against price reductions to improve your gross margins? Sell off unproductive assets, aggressively discount and sell slow moving (i.e. almost dead) inventory, don’t let your Accounts Receivable extend their payments.

Tip # 3. Don’t Lower Prices – Add Value. Avoid the temptation – and pressure – to cut your prices. It will be almost impossible to raise them again later. Either launch a de-featured version of your current product or service and attach a lower price point to that. Or talk to your customers and find out what they need to deal with their challenges and find other ways to “add value” to your current offerings without inflating the cost.

Tip # 4. Don’t make deep cuts to headcount. Letting good employees go can have serious long term effects. You immediately lose the investment you made in training and developing them and you lose an employee whose strengths – and weaknesses – you know. It’s also not uncommon to find that an employee you’ve laid off carried far more knowledge about the operation of the company in their memory than you had realized – and didn’t write it down before they left. There are always some employees who are not pulling their weight. If you have to let anyone go, release them.

Tip # 5. Don’t make deep cuts to promotional activities. Resist the temptation to reduce your promotional budget. If you’ve spent money to create awareness you’ll lose the benefits of that investment if you stop or dramatically reduce your expenditures on, for example, Trade Shows, Advertising and Sponsorships. Look critically at the response rates for your promotional activities and freshen the message or switch dollars from one tool to something more effective – but don’t make deep cuts to the total dollars.

Tip # 6. Help your employees cope. Watch for signs that your employees – particularly the key members of your team – are having problems coping with the recession personally. Everyone makes bad decisions occasionally and, given the easy access to credit of the last few years, many people have overextended themselves. Help them find the advice or counselling they need to deal with their temporary problems. Don’t solve their problems for them – but support them while they do it themselves.


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