Published by The Tennessean
Challenging economic times require tough and different leadership skills. In any business, the first concern has to be financial – make sure your business generates enough cash to both survive in the short term and be ready to take advantage of the upturn when it comes.
In times like this, the less well-run competitors will struggle and collapse. Cash management has to be concern No. 1. Remember, if your business runs out of cash, your business is finished.
Here are a few rules for survival:
Engage your people
Be more visible than ever, be honest and share the facts with your team. Employees are easily your top assets in tough times. They want to stay employed. They will do whatever it takes and will often be the source of new ideas to run the business even more efficiently. Your challenge as a leader is to listen to your people more than ever before.
Be more frugal
Share the expense numbers with your people and ask for their input and support in expense control, both in their part of the business and elsewhere in the organization. When you ask the right questions, and listen carefully, it is amazing how many good ideas emanate from the people who are actually doing the work. Again, your employees will be your number one source for expense control ideas.
Cut capital expenditures
This is not a good time to be initiating large cash commitments to future growth unless you are very solid financially. This can be an opportune time to open previous capital and long-term financial obligations to renegotiation.
Your business partners are interested in your long-term survival and, during tough times like these, can often be persuaded to change the terms of your obligations.
Take a tougher approach than ever to inventory. Don’t buy it until you absolutely need it, and be sure to return all the excess. You’d be surprised how many suppliers, if you just ask, will simply take it back in order to maintain your business. This is also good time to renegotiate payment terms; ask for an extra 30 to 60 days. Extended payment terms can make a big positive difference in your cash position.
Stay close to partners
Be more aware than ever of the financial health of your business partners. There will undoubtedly be a lot of business failures and you need to be able to anticipate those in order to protect your company.
Bankrupt customers don’t pay and bankrupt suppliers don’t ship. Your key suppliers and customers should be willing to share their financial statements with you. Diligent study, regular communication and a good dose of “show me the facts” should prevent bad situations from turning into catastrophes.
Don’t be an ostrich
Uncertain times can open all sorts of opportunities for your business. A few thoughts:
>> Strengthen your team. The available talent pool is growing rapidly. Now is the time to weed out the weak links on your team and add available high-quality talent. But keep this in mind: If you significantly underpay, your new employees will leave as soon as the economy turns around. Even though they are “available” pay them what they are worth, if you want them to be long-term contributors.
>> Innovate. While your competitors are hiding in their foxholes, you can bring to market new products and services that can provide the momentum for your company to recover from difficult times faster than your rivals. If you manage cash well, you can get a big jump on the competition by innovating while the others hibernate.
>> Acquire. Poor economic times always produce big opportunities to acquire other businesses, products, trademarks, real estate, etc. Stay plugged in and get ready to jump, because you never know where the opportunities will show up. Again, aggressively managing your cash position can prepare you to be opportunistic.
Tough times present different and very difficult challenges. many businesses will fail, many will just survive and others will both prosper and prepare for the future. The great business leaders look at tough economic times and see opportunity everywhere.