BETTER BUSINESS Issue Twenty Seven, December 2008
In this months issue:
Rules of engagement for a recession:
1. Get your own attitude right. This situation is temporary, it is not your fault, but you can do something about it.
2. Focus on efficiency. How can you produce the same output with less cost? Will investing in technology improve your performance? How can you lift productivity? Your customers are all looking for value – make sure you can provide it and stay one step ahead of the competition.
3. Make the tough calls that we would rather put off and do it early. Don’t make the mistake of waiting until it is too late.
4. Focus on what really matters – drop outdated commitments and de-clutter everything.
5. Cash is king! Get on top of your debtors and do not let them stretch you out. Look at your credit terms and put resource in to collections.
6. Innovate, innovate, innovate! Break the cycle and look for better, smarter and more effective ways of doing things. Eliminate the philosophy of “if it ain’t broke, don’t fix it”. This is a myth in recessionary times – you must always strive to improve and stay one step ahead of the rest.
7. Review your marketing strategy – not with the intention of pulling back, but with the intention of what else can you do. Look for points of differentiation and yell them from the roof tops.
8. Do not discount! Instead, try to reposition your product or service to emphasise economy or value for money. At the same time take out costs so that you preserve your margin. If you simply reduce the price without changing the feature/benefit mix you will struggle, not only to get margin in the short term, but you've made it much harder to reposition at a higher price later when the economy picks up.
9. Look for the opportunities as they will certainly be there. If you are feeling the pressure your competitors will be feeling it also. This may present some acquisition opportunities.
10. Look to expand your markets and look to sell more products in to your existing markets. Remember the four ways to grow a business:
a. Increase the number of customers
b. Increase the frequency of transactions
c. Increase the average dollar sale
d. Increase the efficiency or Gross Profit
11. Talk to suppliers about your buying opportunities and look to the market for alternatives if you have to. Your incumbent will be very keen to keep your business, so stay with them if you can, but remind them about alternatives and take ideas to the table about how you can both be better off.
12. Squeeze the surplus cash out of your balance sheet. Reduce stock, sell up surplus assets and, as previously mentioned, collect all debts.
13. Review your borrowing structure, pay off debt where you can and consolidate to get the most effective cost of funds. Finally, and most importantly, remember this is only a phase. The economy moves in a continuous cycle and it will improve. You need to be ready when it does.
If you need any help or expertise to assist you with these issues, please contact one of our three directors: Chris Henderson, Cal Rogers or Kevin Wilson on (09) 307 8500.
All the staff at HWI would like to wish friends and clients a safe & merry Christmas, we look forward to working with you and your business in the new year.
Disclaimer: Information contained within this document is of a general nature and does not constitute advice. Readers are cautioned not to act or rely on it without first seeking professional advice.
