Embracing Change
Sponsored by (Your Company Here)
Look for Opportunities
Over the past eight months we have witnessed economic upheaval not seen since the 1980’s, over twenty years ago. The speed of the deterioration and lack of warning caught us all by surprise, leaving us in a state of shock and awe! Now that the shock has worn off and reality sets in the surprise is that life goes on. This is a great opportunity to look at your business model clearing away any debris from the economic storm and prepare to move forward.
Winston Churchill, who understood turbulent times said, “A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.” We are now presented with a unique opportunity to take the time to examine meaningful changes in your business model.
Start by reviewing all expenses nothing is sacred and trim, trim, trim. Every penny trimmed is important but keep in mind that trimming expenses alone will not lead to a better business model. Trimming 100 percent of expenses is certainly possible but would simply result in closing your doors. This may be the best option but should not be taken without looking at all available options and preparing to weather this economic storm. Let’s look for some opportunities.
- Look hard at bank fees. If your business has an “analysis account” you may be surprised by the rate increases. Banks are businesses and need to make a profit, however, sit down with your banker and go over your statement line-by-line, ask questions and evaluate the options. You may be surprised at services that can be trimmed because they are redundant or not used.
- Review telephone and cellular telephone accounts going over it line-by-line like your bank statement. You may find redundancies or items that are not used. For example unlimited texting is a great option but if a minimum number of text messages are actually sent then it would be cheaper to pay a per text message charge. Again, trim, trim, trim.
- Talk to venders and ask for prompt payment discounts. Discounting terms were frequently used to enhance cash flow but usage of this practice has declined. Don’t be afraid to ask.
- If you lease space and are locked into a contract that was negotiated at higher rates in better times, then it may be a good time to sit down with your landlord and review the lease terms. They may be receptive to reasonable accommodations.
- Compensation is an area that should be reviewed. Look for creative bonus opportunities that can create a win-win for you and your employees.
- Review marketing and advertising expenses. Marketing expenses may look like a prime area for reducing overhead expenses remember the reason for this expense category. Marketing and advertising expenses should be viewed as buying customers. Measure every expenditure against the results produced (i.e., does it produce customers?) If it doesn’t then pare down. If it does, you may need to do more of a good thing and even increase effective marketing. Advertising spent on branding is hard to directly trace to new business. Branding is an effective part of your overall marketing campaign and may be a good reduction area, but don’t eliminate it completely.
Using an economic downturn to review expenses and trim, trim, trim is a great first step but is only half of the solution. Look hard at sales and revenue sources and add, add, add.
- Cash today is better than cash tomorrow. This basic finance concept works and can be your incentive to provide discounts to your customers for early payments. Look for creative ways to reduce your accounts receivable.
- Review all product/service categories applying a simple cost benefit analysis and modify or eliminate product/services that don’t produce adequate benefits.
- Be creative and look for new sales channels, getting your products/services to customers, such as using kiosks, the internet, dealers, or outside sales efforts.
- Look for new products/services and business opportunities. Changing your business model is not bad. Every business that successfully makes it past their first five years usually has changed significantly from the business that started. In the beginning of a business, product/service knowledge was your advantage but now that you have demonstrated successes operating a business, look for ways to replicate that success by using your business experience to promote other product/service options.
Paying attention to changes in this economic climate is a good thing as long as it leads to healthy introspection, not fear. This is article was not written to be an inclusive list of opportunities to review. Hopefully, it motives you to redirect that fear of the unknown or change using past successes to see the “opportunities in the difficulty.”
Let me know if you have any comments, questions or suggestions. Write David W. Weatherholt at david@bnewsviews.com
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Library of Congress Cataloging-in-Publication
Business/News & Views® / by David. W. Weatherholt
ISBN: 978-0-9823041-1-2 (electronic format)
Published in the United States of America through www.waconsult.com
Published in an electronic format by Weatherholt & Associates, LLC
First Trade Publishing: October 2008
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