Surviving a Downturn
No one likes to think about a downturn in business. But if it happens, the sooner you react, the better. Here are some tips on what to do to handle it and how to safeguard your company for next time:Prepare monthly financial statements and look for problems before they arrive and wreak havoc. There are only two ways to improve the finances—increase income or decrease expenses. Increasing income takes time but decreasing expenses can be immediate. Look for specific expenses you can cut if sales slow down. Don’t wait until it’s too late to build customer loyalty. Develop a customer loyalty program that will help see you through hard times. Employees are one of your most important assets, and good employees are difficult and expensive to replace. Before you make any staff cuts, be sure that customer service and production won’t suffer. It’s tempting to cut marketing costs when things get tight. But if sales are slow, you may actually need to increase marketing instead of cutting back. While you need product to make sales, don’t let excess inventory create cash flow problems. Banks aren’t interested in lending money when you’re experiencing difficulty, so make arrangements during the good times to protect yourself with a line of credit. If you extend credit to customers, make sure you have a sound policy and follow it. Don’t let customer credit become bad debt that burdens your finances.
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