By Mark Zweig
We’ve had a rough three years. And although there have been some bright spots and encouraging moments, it could get a whole lot worse. I read one gloom and doom forecast calling for 50% unemployment in the not-too-distant future (I don’t agree!). That said, the Federal Reserve tells us they’ll keep interest rates in check for at least another two years.
So what to do now if you want to weather the storm ahead?
Here are my thoughts:
- Reexamine your pricing structure. I’m generally a fan of high prices. They let you maintain good quality staff and afford to spend money on marketing and IT investments. You have to ask for better fees or you’ll never get ’em. That said, you also need to be sensitive to the signs that your clients don’t want/can’t afford your offerings, so be prepared to cut when absolutely necessary. You also need to understand the concept of incremental revenue— that sometimes selling work that is ostensibly below the breakeven multiplier can make you money if you can add it in on top of everything else you have and get it done.
- Move beyond your traditional service boundaries. Two-many A/Es, environmental consultants, and related firms cannot get out of the box they are in. Whenever you start talking about “new services” with them, it usually leads to adding more similar services instead of doing something completely or radically different.
- Collect your AR. Don’t let it sit in someone else’s bank account. Doesn’t make sense— it’s too risky. Go get it. Get it as fast as you can. I cannot overemphasize collection enough. You could have clients go belly up. And don’t be too quick to spend it when you get it!
- Pay down debt. Get out of your receivable line completely and stay out of it. Pay off equipment loans and credit cards. Pay down your building loan if you have a typical commercial real estate loan that matures in a few years. Reduce debt now.
- Store up some cash. Get some cash and keep it as your dry powder. There may be some great deals to get if you have some cash. Cash is hard to come by and even harder to keep. It’s critical, however, to your ability to survive hard times.
- Avoid new long-term commitments. Don’t sign long-term leases even if they give you a great “deal.” There’s no need— there will always be good deals. And slow down on your hiring.
- Hire uber-carefully. Not only do you want to slow down on hiring, you need to be absolutely sure you are only hiring the people who will last with you a long time. Turnover is costly. You cannot afford to invest in someone and have them jump ship.
- Look at all your costs— ALL of them. Labor is always number one. But there are other costs that creep in. Software/services. Intercompany, non-billable travel is another. Too rich insurance coverage is yet another. Even though the income side is more fun to look at, get really familiar with the cost side of your income statement and be vigilant in your quest to eliminate unnecessary costs.
- Push what’s selling. Now— more than ever— this idea is crucial. Stop wasting marketing dollars and your clients’ valuable attention time and don’t try to sell them services they clearly don’t want. Sometimes you have to stop asking, “Why don’t they want it?” and instead simply accept that they don’t want it and pull the plug.
- Reexamine your marketing efforts and strategies. Times are changing and changing fast. Direct mail is coming back into fashion, though it is expensive. Attempting to generate PR by sending out press releases is harder than ever to get and keep working. Telemarketing can work for some sectors in our business. Most firms are seeing diminishing hit rates. Don’t let it happen to you.
- Train your people on how to sell. There are some good sales trainers out there who can make a difference and help get your people to be more effective with their selling efforts. The big problem is usually chasing after too many things and not putting in the effort it takes to win on the ones you could get. It may be time to invest in one of these people.
- Reduce your personal overhead. If you are like many business owners, the amount of pay you take from your company depends not only on how much money the company earns but also on your personal “needs.” Reduce your needs so you can get by on less. It may be necessary. Do it now instead of later.
It made “Yahoo! News” the other day that some sports team owner was said to have predicted the current recession before it occurred. I want to say “Duh!” You don’t have to be any kind of economic genius to see we’re in the midst of a real mess. So act accordingly!