Five Steps to Weather the Downturn
We face some challenging times right now, and the uncertainty of 2009 and beyond will make or break many companies. But in times like these, there are opportunities for the strong to get stronger – so successful CEOs and owners should be launching initiatives that simultaneously address the short and long term. Consider these tactics as you prepare to ride out the storm, and make sure you’re poised to take advantage of the recovery:
1. Know your strengths and weaknesses – Understanding your core capabilities
and areas of vulnerability is critical during a downturn. Weaknesses in areas such as customer service, product quality and safety, and sales representation can be killers. Fix these weaknesses and leverage your strengths so that the organization is strong when the economy begins to recover.
2. Manage costs – During good times, companies tend to employ additional staff, carry higher inventories, and accept longer receivables. It’s time to bring your costs under control: identify areas of cost containment before sales go flat and margins go south, and organize a cross- functional team to identify and take action on cost reduction programs that will strengthen operations throughout the organization.
3. Ensure your workforce is productive – Make sure you have the best possible team in place to get you through the toughest times and maximize sales and earnings as business recovers. Divide your human resources into “A” performers (highly skilled and indispensable), “B” performers (less experienced but able and willing to learn and contribute), and “C” performers (can and will be a drag on the company’s performance during tough times). Strengthen your team by replacing “C” performers, and making sure that “B” performers have opportunities to better themselves.
4. Prepare for the worst – During tough economic times, cash is king. Get a handle on cash flow needs, assuming worst-case sales declines. It’s best to understand what the worst could be, and prepare contingency plans that address these potential challenges.
5. Plan for the future – Companies with healthy balance sheets and strong cash flow need to position themselves to acquire market share at the expense of competitors. Now is the time to re-examine your long-term strategic plan and identify the revenue and profit growth opportunities you will pursue for the next three to five years.