Recession Blues

Things have been going along pretty well. The business has been growing at a steady clip and it looks like you are going to "make it." Then the economy "goes south."

Orders get canceled. Customers are much slower paying their bills. Vendors are much more demanding when it comes demanding payment of their bills. There is not enough cash. What to do!!

The first thing to do is make sure you don't panic. Take a deep breath and chant your mantra. This too shall pass.

Then come up with a strategy. Start by doing a cash flow analysis and gain an understanding of what your cash looks like going forward.

Second, begin looking to where you can tighten your belt. Some might start with marketing expense, but I would not. You have to keep your name out there or risk losing your position in the market. I would look in operations. I would look at part-time positions. I would look at full-time positions that seemed like a good idea at one time, but don't now. Nobody likes layoffs. But the business comes first. Make the hard decisions.

Revenue producing expenses should be maintained where possible.

You need a plan for your payables. Do I pay some in full and others not at all? Do I pay everyone some of what they are owed and try to stay on a schedule? Whatever you decide, you need to communicate it to the vendors and it is important to stick to your promises if at all possible.

You need a plan for sales. Lowering prices might be a short-time fix. But it may be a long-term disaster, as it may be hard to bring them back up when the economy strengthens. Think about running incentives or specials. Do things for your loyal customers rather than the occasional buyers.

This is tough going, but it is an opportunity to "go to school" and "get smart." It is a chance to see where you have been deceiving yourself about items that are "necessary" but really aren't. It is a chance to see how good your people really are.

Tough times are a real test under fire. Those that pass the test will gain valuable knowledge contributing to long-term survival.