Crunch Time – Business Grit When the Chips are Down
It’s 2 am and sleep escapes you, cash flow is tight, clients have gone quiet, and doubt creeps in. When the chips are down in business, every decision matters, and how you respond can define your future.
Business and economic cycles come and go. Business sentiment can be negative. The question is if we see the glass as half full or half empty even in the toughest economic times.
The intent of this article is to provide you with some food for thought to help you navigate the business maze when the “chips are down” for your business. There are telltale signs that your business is heading down the path of distress.
These may include:
Economic and industry trends pointing towards a slowdown in business activity
You are uncertain about the strategic direction of your business
Payments are delayed, and non-payments are escalating into bad debts. You may also notice a worrying decline, or complete halt, in repeat orders from existing clients.
The sales cycle might point towards a situation where you receive less quotes and a decreased conversion rate on quotes
The cash flow of the business is strained as you struggle to meet your obligations and you find yourself in a situation where you are paying your creditors late
Identified business risks come to fruition as the probability of it happening increases
These events may have an emotional and physical impact on yourself and your staff.
Potential impact on the business owner:
Denial – This cannot be happening to me/us
Anger – Why me/us, we are working so hard to make this business work?
Loss of confidence – Maybe we are not good enough?
Tired – Do I still have it in me to move forward?
Fear and anxiety – If I/we cannot see this through I/we can lose everything we worked for and also our employees and their dependants
Isolation – I need to carry this burden alone, I cannot show weakness
Potential impact on employees:
The best employees usually “jump ship” first if they have a sense that the business is distressed. Employees may also start to speculate about the standing of the business as a going concern.
You might decide not to fill vacancies to save cost which leads to more overtime needed from existing employees, this is not productive in the longer run
Employees can become unmotivated
Employees might fear to lose their jobs
The situation may lead to distrust between the owners, managers and employees
There are several ways to address the situation whilst you are working on a solution.
Focus on finances:
Negotiate with creditors to extend payment terms
Have an open conversation with your bank and financiers about the current situation and show them what you are doing to address it
Keep your insurance premiums up to date or negotiate a premium holiday. You do not want to “add insult to injury” if you have an unplanned incident or if a key member of the business dies or becomes permanently disabled.
Focus on people:
Create an open communication forum with all employees. Give them the facts and tell them what you are doing to address the situation.
Keep them informed about the progress made
Make them part of the solution. Ask them for input from their perspective. They are mostly closest to clients and the marketplace. They might see things you miss.
The plan:
Cost management needs to be stepped up
Protect the current income streams of the business
Focus on the marketing efforts which you know from experience bring in the most new business
It is also paramount to ensure that you retain the current book of clients
Operations need to be streamlined. Arrange for overtime when needed. Measure and manage the productivity of staff. You need to know that the contribution of every staff member is supporting the bottom-line.
Get all “hands on deck” and get expert help if needed
When times are good, we have the opportunity to futureproof the business
Build up a cash reserve (3 – 6 months’ worth of funding to carry the business through a tough patch)
Diversify the client base and revenue streams to be less dependent on a few big client accounts
Develop a Plan B which includes a Risk Management Plan and Business Continuity/Crises Management Plan
When times are challenging, we need to be level-headed and not try to resolve it alone. Use all resources which are available to you.
Do you need any of the following services?
Business advisory support / business growth support / business planning
Business finance
Banking facility audit
Family business advisory services
Buying or selling of a business / business valuation
Speak to your SFP Financial Advisor who will introduce you to the designated SUBJECT MATTER EXPERT on the SFP ENTERPRISE panel who would be able to address your specific business need or requirement.
Visit our website at: www.sfpadvice.co.za.