Opportunity During Recession?
The media is full of news about recession. The economy has become a primary topic on the campaign trail. While it's easy to get discouraged with all these challenges, tough economic times can also be a time to prepare for the future when the economy takes the next upturn.
Although businesses naturally go through crisis several times during their lifetime, they are most vulnerable before, during and after a business downturn. Problems that never reached the surface during times of growth and plentiful cash-flow become serious issues when the economy hits hard times. When things start to get tough, many companies go into survival mode – cutting back, avoiding additional spending, scrambling day-to-day. They procrastinate until they have no choice but to make reactive decisions, which sometimes are not the best option. And, then, they wait until the crisis is over to start making meaningful changes.
We see things a little differently. Like the Chinese letter that can be either crisis or opportunity, we like to see opportunity. While we don't dispute that the economy is causing serious challenges for companies and individuals alike, we believe that now is a good time to make meaningful changes. Changes now can ease the current pain and help companies survive. And in some cases, changes made today can help companies come out of the recession in a much stronger position, ready for new growth and more opportunities when the economy rebounds.
3 KEY AREAS FOR REVIEW
We've been able to help many companies survive challenging times by focusing on 3 key areas – Structural Elements, Strategic Protocols and Tactical Actions/Services.
A solid foundation is essential for any business to be successful. Issues that seemed invisible in a thriving economy can become serious threats when there are significant downturns in the marketplace. The structural phase is about creating a disciplined approach to the business and includes:
Business planning, both the short- and long -term
• Where do we need to be at the end of the month?
• Where do we want to be at the end of the year? 3 years? 5 years?
• Do we have the right people, in the right place, doing the right job?
• Do our leaders have the skills they need for today and for tomorrow?
• Do we have a system to get timely feedback to solve issues appropriately?
• How can we identify problems sooner rather than later?
• Who will be responsible for creating solutions?
• Who will be responsible for implementation?
Developing a team of advisors to lead the company through the process
• What expertise do we need from outside the organization to help us through the process?
• How will the team work together to accomplish the goals?
A key to growing or protecting a business is to appreciate the situations that can create crisis. By creating or revising strategic protocols, it helps company leaders become aware of potential problems and find ways to mitigate crisis. These protocols can include:
• Financial statement reviews with bankers
• Periodic management reviews
• Operational audits
• Enhanced quality control on products and services
• A vigorous approach to dialoguing with the customer
• Increased value of informational systems
By implementing these strategic protocols, the company can stay ahead of any serious issues and focus on current and future goals.
Information is essential in protecting companies during difficult times and preparing for the future. By putting systems in place to track, measure and analyze the most important aspects of the business, the company can make the best decisions for both the short and long-term goals and objectives. The kinds of information that can be considered in this area are:
• Identifying where business comes from
• Identifying top product lines and customers
• Understanding inventory turns
• Implementing key indicators and other navigational techniques
• Preparing detailed costing analysis
Without good information, it is very difficult to make effective decisions. It's not just the quantity of information, but the quality that makes the difference. The more companies know and understand about the details of the business, the better they can manage during an economic downturn and prepare for future growth.
BUILDING THE RIGHT TEAM
After more than 30 years of manifesting organizational change, the one thing we know for sure is that nobody can do it alone. It takes a team of professionals, all on the same page, to make it work. Start with your CPA. This is the person who has the best understanding of your business today. Work with your CPA to bring other professionals into the process who can add their unique areas of expertise. In our experience, CPA involvement in any client project significantly decreases the cost and increases the effectiveness.
Article by: Mark H. Fowler CPA, CMC