In the past couple of months we have seen the ringgit plunging to new record lows almost on a daily basis. The stock markets have come crashing down and oil and commodity prices have fallen badly as well. Together with the GST, all these factors have led to weak consumer spending. Items which have to be imported, including raw materials and components, have become more expensive and with all the political uncertainty, we’re living is very troubled and uncertain times.
So, what are some things that we can do to protect our business and to survive this current crisis?
Here are 7 things that every business owner should do to ensure business survival in these uncertain times.
1.Protect your cashflow
Build up your reserves and make sure you keep an eye on your receivables. This is a good time to focus on your best customers and keep your credit and collection policies tight. Slow down or eliminate your poor- paying customers (more on this in point 3 below). Make as much of your sales in cash rather than credit as possible. Obviously you should also be very prudent in your spending, especially on inventory. Watch your stock levels. This is not the time to have cash tied-up in slow moving stocks or heavy over- stocking. Free up your cash flow.
Hold off on your capital expenses unless they are critical for business continuity or for delivery of committed orders.
One more thing. Make sure that you maintain good relationships with your banks. Remember the story of the umbrella being taken away when it rains. Good relationships with your lenders in times like this are always a good idea. Keep them updated on your pro-active steps to keep business running in these troubled times. Forewarn them that you may need more working capital.
2. Protect Your Margins
In times like these, you’re bound to experience cost increases. You have to pass on such cost increases as soon as you can. You have no choice. When push comes to shove, it’s far better to have slightly fewer good customers, than many customers who are not in good standing, not credit worthy or risky paymasters. Unless you are currently operating on exceptionally high margins, you have to protect your margins if you are to pull through this crisis.
3. Step-up your Marketing.
Most businesses will pull back on marketing in times like this, cutting back on their marketing spending. That’s not the right thing to do. If anything, you need more Marketing, not less to generate more leads and more customers, as well as to keep customers coming back. I’m not suggesting that you just spend impulsively. No. You need to make your Marketing work harder than ever. Make it low cost and even more effective – make sure that you are measuring the results that you are getting. This is a time to get really creative in your marketing. Every Marketing dollar you spend has to generate results. Now’s not the time for image or “brand-building”- type activities. Direct response Marketing is the order of the day,
4. Scrutinize your critical numbers
Your marketing numbers are your goldmine! Study your best customers buying patterns. Monitor the size of their purchases. Understand what are your best sources of leads, and your cheapest lead generation strategies. Track your conversion statistics from each lead source. Track the conversion or closing rate of each of your sales people. Test which promotions work harder for you.
All this will help you drive more powerful and more effective Marketing.
5. Slow down or eliminate your poor- paying customers.
Like I said above this is the time to weed out your poor paying customers, your non performing customers and focus on your good loyal customers. Customers who are willing to pay you on time and who themselves have a good strong business. You have to move away from the paradigm that, you know, any business is good, better than no business. That is not true. Your poor paying customers will rob your business of cashflow and that is starving you, like starving the body of oxygen. So make sure you focus on your best customers.
6. Get rid of deadwood
Be lean but not mean. Now is the time to make sure you keep only your top performers. The poor or non-performers will have to go. No matter how long they may have been with you. They are draining your cash flow, and more importantly they are sapping the energy of the rest of your team. You don’t want to be like MAS, right….with a bloated and unproductive work force. Is it fair to the good performers that they have to carry the poor performers?
7. Leverage: Train your team and increase their productivity
With the good people that you keep, make sure you train them well so they can be even more productive. Work on their communication skills, their time management skills, their telephone skills. Better yet, improve their sales skills. Investment in such training will always give you a good return. As Abraham Lincoln used to say, “if I have six hours to chop a tree down, I’ll soend four hours sharpening my axe!” How sharp is your “axe”? How sharp is your team’s “axe”?
Do these seven things and you’ll have a good chance of getting through this difficult period. It won’t be easy, but it’ll be worth it. Stay positive and mentally strong. Be in the company of like-minded positive people. Unless, the Ringgit really does a free fall and hits 5! God forbid!
All the best!