Thursday
As the Australian economy falls ever-deeper into recession, it behoves thoughtful people to contemplate how they will protect their business as best as possible.
I began my first business 61 years ago; I’ve been around. I’ve seen the highs and lows and with complete confidence I will state that this ‘downturn’ will be of a severity far worse than anything seen by anyone alive today – including elderly gentlemen such as myself.
Three generations of Australians have known nothing but increasing prosperity. The toys became more sophisticated and cheaper, real estate ‘investments’ went up forever, and governments continued to pretend it was their own wisdom and prudence that was the font of this prosperity.
They failed to mention the accrued capital of previous generations that has been squandered and the borrowings in the form of a national debt that will never be repaid. (Not to mention the rundown military that is supposed to defend us in this outpost neck-of-the-woods.)
The first part of your business survival plan involves having the wit to understand that you need one, i.e., having the courage to look at what has been staring you in the face for a few years now – over twenty if you have any background in money and economics.
I do realise that only a tiny percentage will read beyond that point.
Once you arrive at the reality that you need a plan, it must be followed up by the further reality which is that the plan must be implemented – by you. Successful prediction is the key to success in all aspects of life, not just business. But only when the predictions are intelligently acted upon. It is no good having the courage to look at what is happening and then not doing anything about it.
1 Cut all expenses to the bone. I have never consulted to a business that did not have staff that were surplus to requirements. Get rid of them – as fast as legally possible. You can be a business, or a charity, both are noble activities, but you cannot combine them.
Note the most productive staff – those that make the highest gross for your business. Make sure that you hang on to them.
Do you have surplus space that you can sublet – particularly to a business that will compliment your own?
Business vehicles – all absolutely necessary?
Get quotes on your insurance before renewing.
Go through your expenses line-by-line and cut anything and everything that is not vital.
Never stop cutting costs.
2 Go through your advertising budget with a fine tooth comb. If it is not working, then change it. Do not stop advertising (that is suicidal), but make sure that every single dollar spent is returning you sufficient to make it viable.
As a simple example, if your business makes a profit that represents 10{781366457d9c05ca9285c5eb3e04ac75968647e24436986cab65f74e6f4b3aad} of your gross, then if you spend $1,000 on advertising, you must be rather certain that it is making you an extra $10,000 just to break even on the advertising. If it cannot make you at least an extra $10,000, then cancel it and invest your advertising dollar where it is profitable to do so.
3 As the economy continues to nose-dive, so more and more businesses will shut up shop. Many are already marginal. Aim to outlast your competitors. Very rarely do whole industries die, but often, as now, their numbers are whittled back. Aim to be the last business standing in your field. This can be achieved by not only cutting costs, but by ensuring that your product is the best that it can possibly be and at the most competitive price and with the best and most expert service.
Make an honest appraisal of yourself and your business. Are both you and your product good enough to outlast the opposition? If you doubt that, then consider selling now – if you can.
4 Ensure that your top people understand what is coming and imbue them with a sense of urgency. If you have your bum sat on a comfy seat most days, then get up from the seat and get out where the action is. Lead from the front. If nothing else, seeing you doing something will cement into place that it is an emergency.
5 Pay off all debts asap.
6 Set money aside as an emergency fund. No one else should know that it exists as that will encourage complacency. Keep it in Gold, not dollars. All currencies are due to fall in value. Or, as most insist on viewing it, the price of Gold is going to rise – big time.