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    1 Reply Latest reply on Nov 14, 2008 1:23 PM by Lighthouse24

    You asked my advice for surviving a crisis so here it is!

    needwc Newbie
      7 strategies to weather the economic storm.

      1. Make decisions now!
      The toughest thing for a business owner to do is make decisions in the tumultuous seas of running their own business. When the going gets tough, many business owners and executives pull into their shell. That's the worst thing you can do. You have to find it within yourself to make bold decisions about your survival and do it now!

      2. Expect the worst case scenario!
      Don't leave anything to chance. Assume the worst case scenario. We've heard that summer of 2009 as the earliest that the economy will recover. Assume it will be 6-9 months longer than that, Consider the effect of the economy and how everything will trickle down through every level. How will you be affected? Make your worst-case scenario and get it down on paper in black and white.

      3. Cut now!
      As painful as layoffs are, make cuts now. Let leases expire on office equipment. Contact your landlord and adjust your rent now. Let them know it is do or die for your company. You are no good to them if you go under. A rented space is better than a vacant space. The next financial disaster will be the commercial real estate market, so slash your rent next month. Be drastic. Negotiate down to half if you can. At the very least, tie your rent to something tangible, like the prior quarter's ending GDP. Ration office supplies now. Set budgets into effect for phone usage, travel expenses, and just about everything else. For those employees you keep, get them involved in cutting costs and let them know it may be their job they end up saving.

      4. Fund raise now.
      Biggest mistake I see business owners making? Waiting to long to line up working capital. It will kill a business in 2-3 months in this economy. My recomendation? Always plan your funding requirements 3 months in advance. Don't wait until your bank statements show negative amounts or your financial's reveal a death spiral. In my business, you don't want to be called the "if Only" business. What is the "if only" business? If only they had come to me 2 months earlier, I could have helped them. Make your CPA earn his or her money! Sharpen that pencil! Every single week for the last two months, we have witnessed one or more funding options go away. Two months ago the bank would loan you money. Now we are seeing alternative and secondary lending sources tighten up. I suspect in 4-6 weeks cheaper funding options will disappear, and marginal businesses will no longer be able to get funding. Let me give you an example.

      2 months ago, I could find cheap money for a business with: A D&B Paydex of 60, personal credit scores of 550, and one and a half years in business.

      Today: You need to have a paydex score of 70-80, personal credit of 640, 2 years in business, stable financial's.

      2 months from now: I beleive it will require a paydex of 80, personal credit off 700+, 3 years in business, and impeccable financial's.

      5. Get funding deals on the table now and find the cheapest money you can find!
      Big mistake: waiting to long to get funding in combination with not having enough deals on the table. What do I mean? All too often, smaller businesses think like a mom and pop business. Get your hands out of your tails and think like an inspired, creative entrepreneur!

      That means you have to do everything you can to get funding lined up and on the table now consistently for the foreseeable 18 months. Your job must include beating the bushes and finding money for your business, in addition to knowing when you need it. Too often businesses come to me too late, with credit so damaged that the best deals I can find will take too long and cost too much. If you wait too long, then you have to pay money up front to people who are less than scrupulous. Money is getting more expensive every week. You have to know what it costs and where to get it.

      For example, the cheapest money you can find right now is funding for your receivables at 5-6%. Bank loans, if you can get them, are 8.5% on up. We always reccomend your first step is your business banker, but we know many have closed up shops for small businesses. But keep the door open, let them know what you're doing and that you are running your business differently than competitors and other businesses, and that you have a plan to weather the storm.

      We have more creative options available as well, Be open minded and don't just look at the interest. Look at the total value of the deal. It's financial impact on your business, whether it entails a lien against your home or personal assets, or your business, or if there is a way to avoid a lien. And consider tax implications for the deal, Is there a cheaper way to get money and pay less in taxes at the same time> There are options available that you probably have never thought of before, but that big companies use to save money every day.

      6. Remake yourself now!

      You must remake yourself. Add new services. Add new product lines. Diversify your product and services. Find products and services that will help people get through the crisis. Wal-Mart,s sales are up 10% while some businesses are down 50% or more. Why? Because they forecasted the crisis and had a plan in place to be "the store" for those hurting and in need, They negotiated pricing with their vendors. They brought in more affordable products. and slashed pricing to look more attractive.They test pricing and products all of the time, and get rid of dead wood. What will your business do differently next month than you are doing today? It,s staff meeting time! Saturday meeting time And major brainstorming is in order, but you can do it.

      7. Act now!

      Make decisions now. Don't wait. Step up to the plat. Draw every ounce of energy from within you and make bold decisions. In a few months when you watch your competitors drop away, you will be surprised at the impact as more of the market will be your for the taking.

       

      Todd Kehrli
      Funding and Working Capital Consultant
      trkehrli@hotmail.com
      207-683-2182
        • Re: You asked my advice for surviving a crisis so here it is!
          Lighthouse24 Ranger

          I don't recall asking, but thanks! Having been on this business ownership roller coaster awhile, I'd like to add two things for business owners:

          1. Relative to making decisions and taking action now, gather (or verify) the relevant facts YOURSELF. In tough times, even good employees and the third party professionals you pay to offer services and advice may be hesitant to give the owner bad news. Is does no good to make a decision now if it's based on inaccurate information.

          2. Communicate clearly and continuously. Everyone associated with your business (employees, suppliers, customers, and other stakeholders) need to know exactly where things stand. When there is a lack of information, people fill in the blanks with rumors and speculation -- which are almost always wrong, and potentially damaging. If employees are insecure, it's the best ones who are most likely to able to find jobs elsewhere -- so they'll bail and leave you with the people who are least likely to help your business survive and recover. It's the same with suppliers and customers -- if the good ones assume the worse about your business (in the absence of any reassurance from you), you'll lose the benefits of the relationships you've built with them. So talk to them often, tell it like it is, and constantly reinforce that you're being straight with them by making the decisions and taking the actions you said you would.

          Best wishes to all.