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The
Sky Is Falling, Maybe, Says Alan Greenspan
What To Do In Case He's Right
What To Do In Case He's Right
The former head of the Federal Reserve issued a fresh warning in March 2007 that the world's largest economy could be heading for recession.
U.S. consumers have helped keep the world economy afloat in recent years by borrowing against the rising value of their houses to finance spending. Now, hit by higher gasoline/energy/transportation prices, a crumbling housing market and an increase in worldwide demand for more credit..retail sales have tumbled .
During a recession the demand for goods and services drop off, prices tend to drop and a number of businesses, most especially those already
struggling, fail.
Just in case Greenspan is right, here are some thoughts on how businesses can position themselves to better survive an economic downturn.
Companies run on money, fail to pay the phone company, the IRS, the power company, employees and suppliers and you are out of business.
So now, before you have the need is the time to secure long term financing. Don't delay, sit down now with your lender and work out a
line of credit that you can draw on as needed. The time to borrow is when you don't need it because when you do need it you may find you
can't get it.
If you already don't know, you need to identify and embrace your core customers. Think of the 80/20 rule. Do 20% of your customers
make up 80% of your business, if so you best know those customers, their needs and desires and the names of their kids.
You also need to know how any downturn in business would effect them, they may be your buddies now but if they fail you don't want them taking you
down with them. Run credit reports on core customers on a regular basis to help you remain confident of their ability to pay...and to possibly
increase their credit line, if they need and can handle an increase.
Invest now in finding new customers. Don't allow your salespeople to become order takers who service existing customers and forget how to sell.
The sharpest tool becomes dull from misuse or nonuse.
Putting all your eggs in one or a few baskets may be efficient and profitable during good times but can come back to haunt you during an
economic downturn.
Even during good times it's important that your people be under a little stress so that they don't become lazy or indifferent toward their work. And
hearing that some guy got the sack for not showing up or failing to work hard keeps the other employees on their toes.
Weed out weak employees and cross train the strong. This is always a good idea but becomes critical when business slows.
Combine Overlapping Business Functions
In theory customer service is the customers' champion, the guys who care and who make things right. However, in practice and most especially in regard to consumer customer service, customer and service is an oxymoron. It's as if the "mad hatter" was in charge. Mumbo jumbo and then more mumbo.
B2B customer service tends to be better because of competition for the same limited customer base and the larger sums of money involved.
In the course of dealing with why customers have not paid according to terms , the credit area deals with many different segments of the business chain, both internally as well as outside the company. Credit is kind of like being the guys with shovels following the parade.
Consider combining customer service with credit for improved efficiencies and communications.
Organize and Document Business Knowledge
Work at finding ways to drive down your costs and your customers' cost of doing business by becoming more efficient in how you carry out your business
processes.
If you operate your business on a word of mouth basis with the new guy learning from the old guy who learned from the dead guy...you need to take
time to organize and document how, who, when, why things are done.
Twenty five percent or more of the total cost of doing business comes from things not being done right the first time. Errors, glitches, screw ups,
misunderstandings, omissions, the left hand not knowing that the right hand exists much less knowing what it's doing; all drive up the total cost of doing
business. Vendors, sellers and customers all pay for inefficiency, for things having to be redone.
There's a lot of valuable knowledge in the minds of the people that make up every business, and most often that's where it stays.
To be efficient (powerful in effect with little waste of effort) businesses must document their hard earned best biz ways; they must have written and useable policies and procedures.
For each business function make up a list of the costs that go with the function. There will be direct and indirect costs (people cost is often the greatest). Based on the costs, establish a purpose for each function that supports the overall business strategy.
Once there's a clearly stated "Purpose" for the business function break the function down to its major components and come up with a goal(s) for each component. State the goal(s) for each major component, within the function, as a policy; i.e. a goal driven guideline.
Determine the steps needed to be taken in order to achieve the stated goal(s). Procedures are steps.
Based on the procedures needed to achieve the goal(s) (policies), establish the People Requirements (skills and personality traits) needed to carry out the steps.
How the people involved think about a business function and the actions they take is determined by the key steps that are monitored (quality control) and by the goals measured. "People respect what is inspected, not what's expected."
If thought and care are given to the purpose and the policies (goals) and the goals are not achieved, look to the steps or to the people involved.
Side Bar
The 5 Organizational Ps is a method for the documenting of policies and procedures for business functions.
Purpose: Must support the company's overall strategy and answer the question, "Why incur the costs?"
Policies: Goal driven guidelines for each of the major components within a business function.
Procedures / Process: The steps that lead to achieving the goal(s) for each of the major components.
People Requirements: Based on the steps (process), what skills and the personality traits are required?
Process Monitoring / Performance Measurements: Monitor for the key steps in the process (quality control) and measure against the goal(s) established by the policies.
If your goals are valid and are not achieved, it's either your procedures or the people involved.
Life After The Crash
After the crash, if it comes and if you're still standing, prepare for the upswing because it will come.
Keep an eye open for opportunities to pick up failed competitors, their good employees and good customers. You were smart enough to have established
a line of credit so use it.
In Closing
If Alan Greenspan is right and the bottom falls out of our collective basket... don't give any precious energy to worry or self incrimination. There is no profit in beating up on yourself over what you could or should have done.
Whether you survive an economic downturn or not, at least learn from it and move on.
Good luck.
The Author
Abe WalkingBear Sanchez is an International Speaker / Trainer /
Consultant on
the subject of cash flow / sales enhancement and business
knowledge organization
and
use. Founder and President of www.armg-usa.com , WalkingBear has
authored hundreds of business
articles, has worked with numerous companies in a
wide range of industries since 1982 and has
spoken at many venues including the
Shakespeare Globe Theater in London. A hard hitting and
fast paced speaker,
he brings life and energy to a critical business function whose true
potential
has yet to be realized by most businesses.
Cimex Training, Irish Institute of Credit
Management, Atradius, Vistage, CU,
CSU, Texas A&M, National Association of Credit Management - Kansas
City,
HTDA, BCFM,
Poli Hi Solidur, Skinner Nurseries, Deardens, Rain Bird,
STAFDA, IBM, are but a few of
the groups, schools, companies and
associations for whom WalkingBear has conducted programs.
WalkingBear can be reached through:
A/R Management Group, Inc.
P.O. Box 457
Canon City, CO 81215
(719) 276-0595
email: abe@armg-usa.com
www.armg-usa.com