OK, here you are in 2009 feeling the effects of the down economy, especially since October.  CRA sales are down 10%, 20%, 30%, 40% and more.  And, if your client base was heavy into the financials, home construction or big retail, you got hurt more than if you were concentrated in local banks, convenience stores, nursing or nuclear.  But, sales being down by any amount is not something most in our industry have had to deal with since 9/11.  What can you do to survive and what can you do to thrive?

 

Here are my suggestions:

1. First, lets go back to Marketing 101 and Business 101 and Economics 101 and Real World 101.  The first task is to be honest with yourself about the future.  Truly honest.  Try to forecast what your future sales and expenses will be and put together a budget including a P&L, balance sheet and cash flow statement.  All three of these are important.  Do them in a spreadsheet so you can play “what if.”  Do a “best case” and “worst case” scenario.  What if sales are off 10% or what if they are off by 75%?  How does this impact your bottom line and your cash flow?  In the Real World, you must manage your cash flow or you will end up like Lehman or AIG and there will be no bailout funds for you.  At the Screeners Conference in November, Sherri Homa (KPMG) highlighted how cash flow can quickly go negative if your clients drag out their invoice payments.  (For an example, reprinted with permission: http://bergconsultinggroup.com/id69.html).  Review these budget statements every month against reality and reforecast.  Then you must take action in your company to adjust to the changes you believe will happen.
2. Since you must guess at what your future sales will be, you want to make as educated a guess as possible.  So, you need to know which indicators will be the predictors for sales to increase or drop.  Will you use unemployment statistics?  GNP?  Changes in Wholesale Inventories?  Retails sales numbers?  Want ads? If your sales are concentrated in an industry vertical, how do you measure the health of that industry and how will that impact you?   How will regional economic situations impact you?  Will you poll your existing customers as to hiring plans?  Will you be adding new services/products to sell to existing customers?    Hindsight is 20/20 and educational, but you can’t win by looking backwards.  
3. Until things get better, be sure to protect your cash flow:
   1. Reduce your A/R DSO (Days Sales Outstanding) by staying on top of past due invoices, by shortening your invoice payment terms, offering cash discounts for quick pay, adding late fees and interest charges on late payments and by taking credit cards and check payment over the phone (We have a program for this.)
   2. Extend your payables
   3. Sell off assets
   4. Get a line of credit, now, pull it down and pay it off
   5. Renegotiate all your expenses.  Consider everything from payroll to benefits to telephone to rent to leases to insurance to accounting fees to IT expense (personnel and other) to freebees in the office and to credit card processing fees (we have a program for this)
   6. Abandon, sub-contract or sell off losing products/business segments
   7. Cut the bottom 10% of performers
   8. Look at what you are spending in marketing, including media and hard copy marketing materials (one of the easiest things to cut).  What are you getting in return on this investment?
   9. Delve into your biggest expense category, Cost of Goods Sold and resource and/or renegotiate everything.  (See our Better Vendor Program.)
4. Increase sales to current customers, add new customers and add new products/services. 
   1. What will your competition do?  How vulnerable are your customers to being taken by the competition?  Are you ready to react?  If you think they are going to act, what should you do to preempt their actions?  Does it make sense to grow through acquiring competitors while their customers are in place but sales are down?  What are you doing to tighten the bond between you and your existing customers?
   2. Which of your marketing/sales programs bring the best results?
   3. Who are your most valuable and least valuable customers?  Can you raise prices on those customers who make you little money?
   4. What things do you do well that can be

                                                    i.     Translated into a different market (from B2B to B2C or from Tenant Screening add Employment Screening services and vice versa)?

                                                   ii.     Marketed to your competition?

                                                 iii.     Better exploited and capitalized on?

5. What have your customers been asking for that is just not available or you don’t currently offer but can invent or acquire or partner with?
6. Exploit your happy customers by getting referrals

 

In summary, determine your Real World 101 reflecting today’s and tomorrow’s economy. Economics 101 says you must maintain your cash flow or you become a Lehman Bros or a Wachovia Bank.  Marketing 101 says it is easier and cheaper to keep a customer rather than find a new one and your best source of new clients is referrals. Business 101 says you are in competition and you had better be ahead of them or you will lose. 

 

So, in a down economy, you need to do pretty much the same things you should have been doing in an up economy except in a down economy your risks increase dramatically and you must be more diligent and action oriented to survive and thrive:

 

ØPre determine the signs and leading indicators that will impact your business

ØConstantly refine these signs

ØAct quickly when the signs appear

ØFocus on those things you can control and not on those things you cannot

ØCut expenses everywhere you can and protect your cash flow

ØRenegotiate costs using the economy as the reason

ØProtect your existing customers

ØGet referrals and use them

ØExpand your offerings

ØBe thoughtful and aggressive

ØCommunicate needs and plans to your employees