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Could We Have Done Anything Different

Aug 31, 2009

More than a few business owners during this recession have wondered the same thing - is there anything we could have done differently that would have created a different outcome?  Some are facing circumstances they have never faced before – bank credit lines being eliminated, vendors cutting off their credit, customers leaving them at record rates, revenue dropping off at a double-digit pace, layoffs of loyal employees, and many other negative outcomes.

 

In this blog entry, I wanted to highlight some examples of what several companies have done that have set them up to not only survive this recession, but to come out of it stronger than before.  I also want to add a few of my own thoughts on what business owners can do to make sure their story has a more positive outcome.

 

In their WSJ article “Halting Recovery Divides America in Two”, the authors highlight Northland Aluminum Products Inc. in Minneapolis, maker of Bundt pans and Nordic Ware.  During boom times, it purposed to retain a cash reserve, so that when the recession struck, it used that reserve to expand.  It is now in the midst of a $5 million project to increase its capacity by 40% to 50%.  "We lived within our means and conserved ourselves," David Dalquist, Northland's chief executive, says of the privately held company.  "Now we're in a position to take advantage of these difficult times."  He says business is up 8% this year, mainly because Northland is grabbing market share from struggling rivals.  Meantime, the construction bust means the plant expansion cost about 25% less than it might have a few years ago.  (See full story at: http://online.wsj.com/article/SB125150649639668499.html).

 

In another WSJ article, “Recipe for Success”, Chef and restaurateur David Burke launched his high-end restaurant businesses during restaurant boom times, starting in 2003.  His restaurants are mainly in hard-hit areas including Manhattan's Upper East Side and Las Vegas.  Mr. Burke has no experience owning restaurants in a down economy.  It is projected that the $7 billion fine-dining industry will see a 12% to 15% drop in sales this year.  However, Burke’s experience is different – with some of his restaurants booked to capacity on some evenings.  His strategy – go against the norm in high-end dining and offer dramatic, attention-getting, and significant discounts.  By engineering the menu carefully and keeping labor costs in check, he is able to slash prices without losing money.

(See full story at: http://online.wsj.com/article/SB124025031068735801.html)

 

Under the category of creative thinking, in the WSJ article “Looking for Cost Cuts in Lots of New Places”, the authors highlight some very interesting new ways small businesses who already keep expenses tight, to find other ways to cut costs, without sacrificing their products and operations.  Some of the highlighted ideas include one company that installed GPS systems in their delivery trucks, to cut down on wasted money on gas when drivers got lost, which saved them about 10% in operating the trucks.  Another company gave up physical office space -- and rent – by utilizing the services of a virtual office company, that offers clients a receptionist to answer calls, a corporate mailing address, and email and fax services -- all while the staff works from home – saving the company $10,500 in monthly rent. 

(See full story at: http://online.wsj.com/article/SB122411037187438233.html).

 

In addition, here are few other thoughts as to what business owners can do to ensure they can survive downturns and come out of them stronger.

 

All business owners need to make sure their corporate values are sound, meaning, that they must maintain a non-negotiable commitment to operating their business with utmost integrity and ethical conduct, in relation to customers, employees, and vendors.  A business with a solid reputation will be around much longer than anyone that is willing to cut ethical corners to make a quick buck.

 

Your customers and employees are the most important people on earth, when it comes to your business.  Without them, you do not have a business.  Take care of both sets of people, and your business will survive the worst of economic times.

 

Stick with what you do best and do it better than anyone else does.  Review your value proposition regularly and price accordingly.

 

Do not slack off on working capital management – be relentless on managing cash well – collect customer billings timely, pay your vendors within agreed upon terms, and keep any inventories as low as possible.  Having a cash reserve in rough times will carry you through to the turnaround in conditions.

 

Always manage expenses as if you are in a recession – stay lean, and preserve cash any way you can.

 

Don’t every stop innovating – find ways to deliver a better product or better service – keep your eyes and ears to what is happening in the industry and how customer's needs are changing so you can create innovative solutions before your competitors do.  This will set you apart and capture greater market share.  Never stop thinking and acting like an entrepreneur – always look for opportunities.

 

Maintain a good relationship with a good banker – make sure that they have regular financial statements that are accurate and timely.  Make sure you provide them good forecasts of your business and have honest conversations with them on a regular basis – they will be there for you when you need them.

Until next time - wishing you much success!

If you would like to discuss your business and how to make sure your company's story is a good one, contact Bill Wright at 757.685.2455 or wwright@b2bcfo.com.

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