TOP TIPS TO SURVIVE THE RECESSION
BE POSITIVE
It’s important to look beyond the short term to the medium and longer term:
n Stay positive about what makes your business great
n Stay positive about your passion for the business
n Stay positive about the future you will create for your business and yourself
n This will have a knock-on effect on other people in the business, your customers and your suppliers
BE DISTINCTIVE
n Ensure that what you offer is distinctive and that your customers are prepared to pay for that distinctiveness
n Hold fast to that distinctiveness and articulate it at every opportunity.
n Without it your offering will be treated like a commodity and you will come under severe price pressure
n Unique Selling Point Must be clear, unique, distinct and known!
BE BRAVE
n It might be tempting to reduce your prices to win business, you’re probably better off increasing prices, even if it means losing business
n Here’s why: if your gross margin is 20% and you drop your prices by 10%, you have given away half your profit. To achieve the same profit in € you have to generate twice as much revenue, that’s just not feasible, and to do so would probably mean taking on more staff and increasing overheads which would then probably need to be paid for before payment is received from the customer, resulting in cash flow shortages.
n If, on the other hand, you raise your prices by 10%, you will either make 50% more profit
n or you can afford to lose about a third of your sales volume while maintaining your current profit. You should then be able to reduce overheads too since you will be a smaller business.
KEEP COSTS VARIABLE
n Some costs vary with the amount of sales volume while others are fixed irrespective of sales volume
n In times when sales volume is unpredictable, try to ensure that as many costs as possible vary with sales
n For example, costs of associates or sub-contractors are variable whereas the cost of employed staff tends to be fixed.
REDUCE FIXED COSTS
n At the same time, it makes sense to reduce fixed costs where you can
n Go through each cost in turn and ask yourself whether it could be reduced,
eliminated or done in a more flexible way
FOCUS ON CASH
n Never is the saying ‘cash is king’ more pertinent than in a downturn
n Make sure you manage your cash very closely
n Make someone specifically responsible for it
GET PAID QUICKLY
n Get invoices out on time and do everything you can to ensure customers pay on time, from forging strong relationships with their accounts payable,to finding out when they do their payment runs
n Call them a week before the payment run to check your invoice is on the list
n At the outset of projects, negotiate a payment schedule that includes upfront and/or interim payments.
NEGIOTATE DEALS WITH YOUR CREDITORS
n It may be worth paying suppliers early to secure discounts - even if you have to borrow from the bank to do so
n Say, for example, the normal payment term for a supplier is 45 days, but that supplier agrees to offer a 2.5% discount for settlement within 10 days, the saving you will gain by making early payments is 26% per year
n The same considerations, but in reverse, apply to the discounts you allow your customers
STAY CLOSE TO YOUR BEST CUSTOMERS
n Do you know who they are?:
n Offer to partner with them – you are both in the same boat
n Suggest ways to help your customers to
n Save money at this time
n Make money at this time
n Be prepared to renegotiate contracts
n Give customers something extra free!
KEEP SELLING
n Offer prospective customers choices
n Sell small at the start of new relationships
n Keep your sales message simple & clear –what’s in it for the customer?
KEEP WORKING ON YOUR CUSTOMER SERVICE
n Deliver quicker
n Under-promise & over-deliver
n Train, train & train to be the best you can be at what you do!
n Like Barack Obama, create your own possibility!
