Hornbeam Highlights 31

Prospering in Recession

With the papers full of depressing economic news now is the time to start to take action to meet the downturn.

The first thing to do is to weigh up the Strengths and Weaknesses of your own business.

For strong businesses, particularly one with plenty of cash at the bank, recession provides many opportunities. Previously scarce resources, such as property, skilled people, and equipment, become available, and at affordable prices. Furthermore a strong business can afford to spend on sales and marketing at a time when many competitors are cutting back or going bust.

However, for most of us, whose businesses are ticking along, recession is not a time of opportunity but a time to take hard decisions.

First and foremost in recession cash is king, so review and, stop or defer voluntary expenditure – typically Capital Purchases, Marketing and Advertising spend, Training, Recruitment and trivial expenditure with no commercial purpose.

But cash flow problems are often a symptom of more serious underlying problems with profitability, and it is really these that deserve most attention. Recession provides the chance to:

• Make redundant the least productive employees (take HR advice first)
• Scrap the least efficient machinery
• Dump loss making products or customers

Also in recession it is important to offer the customers a very competitive price but also to offer higher value options/products/services. This differentiation is particularly important in retail, where shops or restaurants must offer some really competitively priced options, but must also offer better quality products or larger portions which give a better chance of making a profit. High value add-on services are particularly crucial to many businesses when headline prices are under intense competitive pressure.

The first chapter of the Hornbeam Guide to Successfully Managing Your Small Business is devoted to practical advice on selling for more, and this is particularly critical in an economic downturn. This book is free to clients if they ask for it. We also offer a range of services to help clients identify ways of getting more for the work that they do. These range from a half-day brainstorming session to long term mentoring agreement.

After maximising income the next important thing is to make sure that you get paid as soon as possible, to minimise the risk of bad debts as well as to support cash flow and minimise borrowing costs. The second chapter of the Hornbeam Guide to Successfully Managing Your Small Business is devoted to getting paid. We also offer a half-day consultancy on the credit control cycle and a debt collection service.

But in recession it is careful attention to costs, which must be the first priority. For each cost there are two principal factors to consider. Firstly, the buying price and secondly, the efficiency of utilisation. In recession there are many opportunities to obtain better buying prices. However, you will only take advantage of these opportunities if you approach buying systematically. Many businesses get in the habit of relying upon established suppliers without checking prices. You should look at the biggest costs first and obtain competitive quotes. Although it is not always cheapest that is best, (quality is also important) use the recessionary environment to drive down supplier prices.

This also applies to overhead costs, particularly:

• Borrowing (bank) costs
• Telecom costs
• Stationery costs
• Insurance
• Business Rates
• Maintenance costs
• Motor and travelling costs

• Firstly, study your most admired competitors……are they doing anything more efficiently than you, if so copy them
• Secondly, are you using modern technology where it offers significant efficiency gains?

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