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Informed decisions are key to business survival
There has been some informed talk of UK PLC being at the bottom of this current recession, indeed house prices have risen for three out of the last four months.
Is this the end of the troubles or is it merely a blip before another leap into the abyss?
I might not have the answer but what I do know is that there are plenty of things businesses can do to insulate themselves from the current economic climate.
Never had the adage that cash is king been more appropriate. Businesses do not go into liquidation because they are not profitable, they go out of business because they have simply run out of cash and cannot pay their debts.
You should tighten up on credit control. Do not be afraid of being strong with your debt policies. If your customers are making excuses and not paying, talk to them and come to some arrangement to settle in instalments.
Cash is the life blood – no cash, no business.
Sales are absolutely paramount. Lots of businesses look at costs in difficult times and seem to forget about sales.
Marketing should be key to your overall strategy. You need to let your customers and, of course, potential new customers know that you are still around and open for business. Do not stop marketing altogether, although you may of course need to refine and adjust your strategy to suit the climate.
Sales for sales’ sake – turnover is vanity and profit is sanity. We have all no doubt heard these mantras and there is a good reason why we have probably heard them… it’s because they are true.
There is no point in making a sale that does not make the amount of money you need to cover your costs and make a profit.
Check your pricing – do you need to reduce or increase your prices?
Unless you have gone through the exercise of looking at your margins and contribution levels you will not know the answer to the question and could end up making completely the wrong decision.
Of course, costs should be looked at. But you can only shave so much off your costs and once you have done this you should go back to concentrating on cash, sales and pricing.
There are many, many things businesses and their owners can do in a difficult market to protect themselves and their businesses.
If there is no management information available to make the key decisions, then the business and the business owner could well be making fatal decisions.
To finish on a positive note, those businesses that do have the information and systems to help them make informed decisions are the businesses that will be around in 12 months’ time – maybe not fitter, but certainly leaner, more sytemised, more process-driven and ready to flourish as the economy moves back towards equilibrium.
Neil King – Cedar and Co.