Surviving the Economic Crisis - By Michael Cameron

The world has changed.  The excesses of the past five years are a thing of the past and businesses need to evaluate themselves and the market to ensure their survival and to prosper.

The purpose of this article is to provide some hints to help you through these difficult times.

Cost Management
Often the first idea that people have when thinking about cost management is "what staff do I no longer require?". Unfortunately, redundancies may be unavoidable. However, before any knee jerk reaction is made, consider this -

• Will I be losing experience and/or skill that may be difficult to replace when the economic climate changes?

• Will I have the productive capacity to be able to meet current client requirements with reduced staff levels?

• Will this have an adverse impact on remaining staff, which could lead to reduced morale and efficiency levels?

Due to workforce flexibility, an alternative to redundancies may include -

• Job sharing

• Requesting staff to work only three or four days per week

• Encouraging staff to take annual or long service leave (these costs are paid on redundancy anyway)

• Wage freezing

It may also be possible for more staff to work from home and to implement computer sharing, thus potentially reducing the space required to run the business and reducing leasing costs.

Furthermore, it may be possible to reduce other costs instead. Overheads such as telecommunications, insurance, printing and stationery, freight etc can be reduced through negotiations as these markets are very competitive. Items such as travel can be reduced easily through Tele/video conferencing or use of other electronic media.

Cash Flow Crisis
Many businesses struggle to survive, not because the business is not profitable but because of day to day cash flow problems.

Consider the following ideas to assist in this area:

• Review debtor collection procedures and ensure debtors are followed up regularly, e.g. fortnightly.

• Terms for slow paying debtors could be changed to cash on delivery.

• Review costs (as mentioned above).

• Divest unproductive/idle assets.

• Discuss re-financing or adjusting loan terms.

• Consider equity injection.

Availability of Debt Finance
Over recent months, the banking industry has tightened up its lending requirements. This has meant that debt funding has become particulary difficult to come by. Additionally, banks are reviewing their current clients and assessing them for risk. Banks hold the upper hand and are now able to pick and choose clients that fit into these tighter controls.

In order to avoid confrontation with your bank, it is important to keep them informed of any issues affecting the business, both internal and external.

A well constructed business plan for the purposes of new finance or re-finance can be an invaluable tool to set your business aside from the rest and ensure that your business continues to survive and prosper into the future. It may also be important to ensure current funding levels are maintained.

Customer Service
On a non-finance front, customer service becomes particularly important during these times. If people feel satisfied with the service or product supplied, they will be less likely to try the competition. Therefore it is important to consolidate and build your relationship with customers.

Conclusion
We live in unprecedented economic times, so it is important to be pro-active in any initiatives undertaken. The businesses managed well will survive and come out of the other side leaner and stronger then ever, ready to increase market share and prosper long term.

Anyone seeking advice on how to set your business up to withstand the gloom and be ready for the next growth cycle should contact us.

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