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Welcome to your Business Growth Tip
Seize the advantage in an economic downturn
Taking no action is the greatest risk in an economic crisis, but taking rash or disorganized actions can be nearly as damaging - according to the Feb 09 issue of Harvard Business Review. Here’s a summary of the article:
Many companies fail to see the opportunities hidden in a downturn, but in order to take advantage of opportunities - first you need to secure your survival:
Studies show that companies whose early responses to a downturn are tentative (e.g. modest belt tightening), typically over-react later on (e.g. making severe cost cuts which impact future competitiveness).
1. SECURE YOUR SURVIVAL
· Do a thorough strategic assessment - take action to mitigate weaknesses and threats.
· Quantify the impact of a worst case scenario and be prepared to confront this reality - (e.g. what effect would a long-term 20% decline in revenue, and a 5% drop in prices have on your profit and cashflow?)
· Report rolling cashflow forecasts on a weekly basis – know your cash position
· Negotiate better purchasing terms with suppliers and reduce inventory holdings
· Tightly manage customer credit and speed up the collection of accounts receivable
· Reduce debt levels, and secure access to additional lines of funding
· Divest non-core assets and non-core activities that deliver little value. Don’t delay in the hope of getting a better selling price in the future
· Identify and retain high margin core customers. Divest low margin, high risk customers
· Rather than discounting – explore innovative pricing strategies and terms for your customers
2. INVEST FOR THE FUTURE
· Keep investing in marketing. (Firms that slash their marketing spend, typically have to spend far more than they saved in order to recover later)
· Assess your industry – what strategic moves are other key industry players likely to make, and what strategic moves do you need to make to position your firm for future success?
· You may need to totally rethink your business model in light of expected industry transformations
· Make calculated investments in Research & Development
· Develop the core competencies that will create your future sources of competitive advantage
· Develop your people – and upgrade the quality of your management team
· The best deals for strategic acquisitions of other firms are made during downturns
Effective strategic planning and disciplined execution of your plan is more critical now than ever.
If you don’t have a clear strategic road map for the future, RESULTS.com can definitely help you. Click on the strategic planning link below:
Stephen Lynch
Chief Operating Officer - Global Operations
RESULTS.com
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