Preparing for the Recovery
As a result of the sharp economic downturn just experienced, most businesses operate on a bare bone basis. As soon as economic activity turns around it will e necessary for most to hire right away because capacity is now so greatly reduced.
Before doing so, take the time to review your Cash Flow forecast and your Strategy position.
1. Cash Flow: When a business grows again, it absorbs cash; particularly when inventory, receivables have to be rebuilt after a bare bone period. Building working investment is inevitable, but it quickly becomes an issue when financing is difficult particularly now when banks continue to sit on the side lines.
2. Strategy: Although this is a word that is not part of the every day vocabulary of most small and mid-sized businesses, strategy should be reviewed at this time. Why? Because all businesses are exposed to change that occurs faster than ever before, and the crisis may hide those changes so to speak:
a. In a very disruptive crisis business structure always adjust. The assumption is that when business picks up again, the game will look the same, but permanent disruptions wil have occurred. Be prepared. Make sure you explore:
- How your clients have changed during the crisis? Have their own markets shifted?
- How have your competitors fared?
- Are there new competitors that are from outside of the traditional landscape? When business is slow, companies often expand into contiguous markets; some new players may have shown up on your turf.
- Are some of the players offering a different value proposition? Disruptive innovation often appears in crisis times.
- Has there been a shift in what your clients buy? how they buy it?
b. Have you reviewed how you do things? Could you increase the value to your clients and/or increase productivity by changing your processes? Have you streamlined operations so you can now add business in the most effective manner?
c. When you begin hiring again, will the next person you hire be doing the same job as the one you let go? Or do you need different skills?
The end of a recession is a good time to review your business environment. When things are still slow, prepare a plan on how best to manage cash flow to respond to the opportunities and build a profitable platform.
Working Investment and Payroll will quickly absorb all cash if you do not focus on productivity, through process improvements and efficiency investments.
By Alain Bolea
July 7, 2009
Alain Bolea is a member of The Inspired Business Center team; to view is profile please follow this link: http://www.theinspiredbusiness.com/team.html