Mr. Muhamed Muneer

Small businesses have a major disadvantage: when business has a national downturn, it often hits small businesses the hardest. Because of the smaller production or services capability, a rise in prices will hit them badly. Most often their customers are big businesses and they may not agree to revise rates agreed upon earlier unless small businesses are smarter in including price fluctuation clauses in the agreement. More over, when prices go up, many customers re-think purchases or put them off until later.

How you react depends on the seriousness of the situation. Sometimes you can just hang on and ride out the storm. If the situation is really serious, then you may have to resort to drastic action. Unfortunately the most drastic action is laying off some employees. Not a
pleasant experience. There is nothing worse than losing a good employee who did nothing to deserve it.

Imagine you are swimming and suddenly a strong current starts pulling you away from shore. If it carries you too far you may not be able to get back. You know how to swim -- slow, methodical strokes -- out of the current and then back to shore. But suddenly panic sets in. You start to valiantly pound and kick against the current. You begin to weaken. The harder you work the worse it gets and you are swept away. The same thing can happen in your business. The first step is calming down and getting your business under control. It isn't so much that you must get back to shore (economic safety) as much as keeping shore in sight and not going out any further. Poor organisation increases your chances of failure.

There are some things you can do to get through the tough times:

• If you don't already have a good accounting system in place, make an appointment with an accountant and make sure you know where you are financially.
  
  
• Make a SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis of your business. What strengths can you capitalise on, what weaknesses can you eliminate?

• What are your possible opportunities and where could there be threats?

• You may need to take legal advice to handle unsympathetic creditors. Get the best possible advice here; else you will end up paying dearly for inefficiency.

• If you are losing customers, try to identify the key problem areas that are responsible and correct them. Try building relationships early on.

• If you have been offering 30, 60, 90-day credit to customers you may need to offer this service only to your best paying customers. You can't afford slow paying customers. Tighten accounts receivable. Ask customers to pay faster.

• Concentrate all spending to either increase sales or cut costs. Look at effectiveness all the time. If you are offering a discount sale, advertise in off-beat media or only one publication or channel. Please refer to the various situations I have covered in another
  article on the subject.

• Resist the mistake of cutting expenses for promotional efforts during tough times. You need paying customers. Also, you need good brands - whether company or product.

• Concentrate on core products and higher profit items. Pretty common sense, isn't it?

• Eliminate vendors or middlemen not carrying their fair share.

• Completely review your purchasing systems and procedures. If your big brother can twist your arms, why can't you try twisting your suppliers'?

• Sell excess inventory and equipment. In short, cut flab.

• Analyse cash flow on a regular basis. Daily, if necessary. This requires good planning skills. So, better start planning your sales and marketing efforts.
  
  
• Can you reduce short term debt? You must.

• Consider offering incentives to reward good sales efforts. Tough task when the going is tough, but you need this in order to bring in the moolah to pay off your suppliers and bankers.

• Share promotional costs with other businesses or vendors. We have discussed this issue in an earlier column.

• Obtain long term credit or investment partners.

  All these are fine. But how do you know when you're cutting to deeply? Sometimes you can take a good thing too far. If two aspirins are good, then eight must be better. But you know that is not good at all. Here are some things to let you know you're going too far.

• Customers complain they don't see your salesman often enough and are trying your competitors.
  
• Employees are concerned about their situation and start discussing company information with customers.
  
• Customer service complaints increase.
  
• Employee morale is low. CVs start floating in the job market.
  
• Salespeople and other employees are reluctant to try new ideas and become less aggressive in closing for fear of losing sales.

Things are really bad if these signs are on. So, how bad can things get? We've all heard the stories of business survival. Take control of the cash flow, sell company cars, eliminate bonuses, call in credit cards, fire non-essential employees, change the compensation system, change the management system, and still try to keep as many good employees as possible. Hopefully, you will never have to resort to these measures in your
business.

The bottom line is simply this. When you started your business, you had a business plan. Once the business was up and running you put the plan away and probably never looked at it again. You should revise and renew your business plan every year. And monitor on a quarterly basis. Revising your business plan will force you to take stock of your business and where you want to go. It will also keep you up to speed on what's going on in the world that affects your business. I know you don't have the time to do all this. Well, my advice is to make the time.

When tough times come -- and they will -- you'll be prepared.

Muhamed Muneer has extensive marketing and management experience and writes for a number of well-known publications world-wide. He has five published books to his credit.

Feedback and queries may be e-mailed to him directly at muneermuhamed@hotmail.com