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Turning Survival Into Growth

DIFFICULT times and economic uncertainty make planning the future of your business a real challenge. The economic hardships cause people to react in two different ways.

The easiest option is to give up.  The other alternative is to thrive for solutions to ensure that the business survives. 

Business people need to learn a few things about economics and business planning if they are to survive and grow their businesses.

The biggest killer of businesses, especially the small and medium-sized ones, is cash flow.

A number of profitable businesses have gone down after being stuck in a cash crisis.

Business owners or managers need to understand how the cash in their business works.

It is essential for them to analyse the cash position of the company regularly.

In this environment of high inflation and rapid change, weekly cash flow analysis is crucial.

To avoid surprises, you have to estimate all your expected cash outflows and inflows for the period, and quickly make plans to cover any gaps before they surface.

Since cash is tied to your working capital, reducing your stocking levels may free some cash for other critical needs.

As suppliers now demand cash upfront or on delivery, you need to carefully weigh the costs of holding more or less stocks against the rising prices.

It is better to be caught off with low stocks than without cash when the landlord comes to collect the rent.

Profit plays a big role in your cash flow performance. Boosting your profit improves your cash flow, especially when you collect all receivables on time.

You can boost you profit by increasing your sales revenue, prices (where it is possible and legal) and cutting costs.

To achieve this there is need to realise that business plans that were formulated in good times may not work in times of economic difficulties.

To survive, it may be necessary to change the business model so that it fits in with the prevailing circumstances.

You may need to change your product offering, or your target market.

We have seen it with retailers who relied on credit sales; the circumstances now require them to sell for cash, and they now have different types of competitors, from supermarkets to flea markets.

The best way to cope with the uncertainty is to be as flexible as possible.

Avoid long term commitments and contracts if you can.

Be prepared to make changes as circumstances change.

The more options you have the better.

Cutting unnecessary costs is crucial to a business’ survival in tough times.

Staff costs make up the largest expense for many companies. Although it may be necessary to let go of excess staff, this needs to be thought out very carefully.

Lay offs may save money, but only in the short term; and they do not always reduce expenses as much as desired.

On the down side they may reduce the company’s performance. A business which retrenches workers, or has a high staff attrition rate, suffers from personnel uncertainty.

As a result, the best personnel, who are more likely to get alternative employment, will leave, thus reducing the quality of your staff. 

Companies contemplating job cuts need to consider more than just the hoped for cost savings from a layoff.

They need to consider the reduced morale and the reduced performance and innovation it will bring. They need to consider the reduced quality of the company’s overall workforce that will result.

To survive and grow, business owners need to bond with their team in tough times.  You have to be aware that difficult times make staff nervous.

Remember that they have mortgages and rents to pay. People get emotional when they think their future is in jeopardy. 

A motivated team behind you will perform above the ordinary in difficult times and may be the key to your company’s survival and growth.

When budgets are tight, some business owners take away resources from marketing as a way of cutting costs.

Others try to save money by reducing sales commissions. That is a recipe of disaster.

Reducing marketing activities in hard times will reduce your sales and your profit, and make those times harder.

This is the time for growth companies to really focus on bringing in the business.

You need to review you marketing plan. Refocus on your real market, and work to satisfy it better than your competitors.

Often business owners view a niche market as narrowing their sales or cutting into a profit margin, so they fear it.

The truth is that a niche market could be defined as a component that gives your business power.

A niche market allows you to define who you are marketing to. When you know who are you are marketing to it’s easy to determine where your marketing energy and dollars should be spent.

Some business people think that they can get away with poor customer service when times are tough and there are shortages.

That is a dangerous mentality. Do you know 80% of your business comes from 20% of your customers?

And that it costs five times more to get a new customer than to retain an existing one?

With that in mind, if you wish to succeed in business, take special care of your existing customers. Do not take them for granted — you will not get away with it.

By Phillip Chichoni

lChichoni is a business planning consultant who works with small and medium-sized business owners and can be contacted by email: chichonip@yahoo.com


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