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Preparing for the Inevitable: Tactics for Surviving Business Slowdowns

(November 2007) posted on Wed Nov 07, 2007

Business occasionally tapers off, but with right strategy you can keep your company healthy during economic slumps. The following discussion explains how you can anticipate downturns and what you can do to keep the work coming.


By Mike Ukena

Companies that fall during an economic slowdown generally do so because they fail to react, either in time or at all, to the market conditions that affect their business. For instance, if you’ve charged through the summer with high staff levels because you have lots of work, now is not the time to take low-margin business just to keep everyone busy. Instead, it is time to get a lot more conservative with your staffing decisions. Hopefully, it will not come to laying off your good people, but instead to allow attrition to take its course and not replace those who depart. If things do get worse, layoffs may be the only way to go.

If there is no downturn, however, or if it is more moderate than you plan for, there is no negative to being prepared. You will not be caught in an unworkable situation. Instead, you will be able to gear right back up and go for the business—albeit with a healthy company, rather than one that has been stressed to the breaking point.

 

Business health

You can determine the health of your business in many ways. Consultants get paid big money to help companies through rough periods. I am not advocating the use of a consultant. Instead, I am saying that common sense is just as good a tool as any. If your business is doing well and making money, and if it has survived previous slowdowns, I can almost guarantee that you have the right stuff to help you through it again. If your business is young and you haven’t yet seen a downturn, then caution is definitely the watchword right now.

I have put together a short checklist of indicators that I feel are im-portant to watch at the beginning of any slowdown. Most of these indicators actually apply any time and should be looked at often. But during a downturn, they are essential. They are:

• Accounts receivable aging

• Cash flow

• Employee satisfaction

• Business backlog

• Inventory levels

• New customer business percentage/

order inquiry rate

• Prior year business comparison

 

Accounts receivable aging


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