Survival Techniques Similar to Those For Growth

For years, the most frequent question I have received from my clients is “How do I grow my business?” Today that question has been turned on its head as they ask for help to survive; for recommendations on things to do and actions to take that will allow them to hang on long enough until there is some sense of economic stability, optimism and regular business activity again. Then maybe they can think about growing again. My reply is not what they expect. If you have a business or manage a division of a larger company, there are a number of obvious things to do when a downturn happens. First, you reduce your expenses, cutting everywhere. You make every cost or expense item, even those you used to consider a fixed cost, into a variable expense and you cut, negotiate and renegotiate with suppliers to bring your costs down. Second, you take an objective and hard look at cash flow. You want to bring cash in faster and delay cash outlays as long as possible. Once again, you negotiate and renegotiate with both customers and vendors in ways that help you maintain a good cash position. This includes following up on your receivables sooner as you sell off excess inventory. And then you talk to your bank to ensure a steady line of credit. But survival, just like growth, needs revenue, for cost-cutting alone cannot and will not be enough. An old sales manager of mine used to say “Nothing happens in a business until you sell something.” I believe that is as true today as it is when times are good. So my fundamental recommendation, after all the cost cutting has been done, is to review, analyze and plan ways to maximize the sales opportunities available and then act. Begin with a thorough sales analysis by customer, by product, by price, by season, etc. for the past one to two years. You probably input this data into your system every day. If you create management reports that convert this data into useful information, it can help you target your best opportunities. Maybe you will notice that your current customers are buying only some of your current products or services. Call on them to buy more or your products or services. Or create new products or services for them to buy from you. Experience suggests it is nearly always easier and faster to sell more to your current customers who know you (and hopefully already love you!) than to seek out, pitch and close new customers. Or maybe your best opportunity is to get new customers. Your analysis will likely show you where your past customers have come from and what products or services first brought them to you. Maybe now is the time to buy out your weakened competitors. If you have run your business well and are having issues, just imagine what your poorly performing competitors are feeling right now. A polite but direct approach may open the door to a deal to take over their client base, expanding your business while reducing the double overhead of two businesses. Your analysis will also likely help you define and refine your marketing message around certain price points. Yes, it is a great and timely idea to review your pricing, first because almost all small businesses set prices lower than they should or could; and second because your cost structure has recently changed, from the price of gas to the cost of basic raw materials. Check out what your local competitors charge and call across the country to colleagues to learn what they are doing and refine your prices. Recognize that you want to price your products and services as high as possible to maximize your gross margin while setting them low enough to maximize your sales volume. If in doubt, do some price testing. Once you have looked and learned, then act. Because the best way for your business to survive these tough times may be to do the same things you would do to grow your business and prosper. Whatever you do decide, do it now. Ben Tenn of Tenn Consulting leads the highly recognized “The Tenn Ways to Prosper” small business seminar series and provides small business consulting with an emphasis on marketing and sales. Since earning an MBA from UCLA he has enjoyed 35 years of business experience as a corporate executive and small business owner including 11 years at The Walt Disney Co. and 13 years as a business consultant. He can be reached at (818 993-8222 or [email protected].