A Lesson In Economic Survival For Your Business
"Making an Economic Turndown Work FOR You"
by jl scott
Let's talk about what businesses need to do when the economy tanks. Remember - for 15 years, I worked with companies in financial trouble: keeping them out of bankruptcy and turning them around.
Folks often think that involves basically firing everyone and hiring new people. Not true. The idea is to find, and correct what's being done wrong.
by jl scott
Let's talk about what businesses need to do when the economy tanks. Remember - for 15 years, I worked with companies in financial trouble: keeping them out of bankruptcy and turning them around.
Folks often think that involves basically firing everyone and hiring new people. Not true. The idea is to find, and correct what's being done wrong.
Many of my clients were family-owned, mid-size companies. That would have made it pretty hard to fire everyone, even if I wanted to. I DID find a thief, or two, in the woodpile of a couple of larger companies, but that's another story.
My busiest time at all this was during the economic turn-down of the '80s and early '90s. So, I'm no stranger to knowing what to do when the economy goes south.
Before you can correct anything, you have to find out the problem. Obviously, not every company had the same problem - other than the basic one caused by low cash-flow.
In looking for the problems, I was able to see what GOT them into trouble. I discovered several things many folks do that increases the problem, rather than alleviating it. These particular things are nearly universal - everyone seems to do them.
So, I'm going to show you how to avoid these mistakes, STAY in business and come through the turn-down with a minimum of problems.
Let the Games Begin
Let me say, right up front, you will need to demonstrate some will-power. If you can't do that, you probably shouldn't be in business. But, there's an easy way to do that.
Think of saving your company as a game. When you win, you'll still be in business after the danger has passed - and after others have gone under.
Making it a game doesn't make it childish. It gives you focus which, in turn, keeps fear to a minimum. The thing you do NOT want to get bogged down in is fear, which can bring about the very thing you fear.
Instead, by focusing on the game, you keep moving forward in a positive direction. If things look rough, you go back to the game and find something else you can do.
I've gone through a couple of very bad times with iCop - once due to an economic turn-down, once due to other situations. But, each time, I just sucked it up and did what I had to do to take care of the company.
On one occasion, I had to make some serious financial cut backs. But, I lived through it and so did iCop! And, so will you.
As a turn-around specialist, I was right in the middle of things at the client company. I was into the books, so I could see where they needed to continue to spend money and where they needed to cut back. I'll have to leave it to YOU to make those decisions for yourself, based on what I tell you.
Expenses Will Need to be Cut ...
... both personal and business. Start with the personal. Remember - the business is the most important thing right now. We need to do whatever is necessary to STAY in business.
You don't need to do a lot of heavy deprivation. Start by cutting back the over-spending we've all been doing.
Dump Starbucks - that, in itself, will save a bundle over the course of a month, and you CAN still get a cup of coffee for under a buck! What the hell was ever cool about spending $4.75 for a cup of crappy coffee in the first place?
In fact, you may not have a choice on that one. I've heard that Starbucks is going down, but I don't have any sympathy for them. That place was the epitome of the nonsense of greed.
Speaking of that, you may have noticed, there's some price gouging going on right now. For instance, I went to the same place I've gone to buy corn for the ducks for four years. Within a month, the corn doubled in price!
Now, there is NOT a shortage of corn and they've been using it for ethanol for several years, so they had no excuse. So, why the big jump in a month? Price gouging. They think they can get away with it since everything else is going up, and people will just pay it.
The trick is - do NOT buy anything when looks as if price gouging is going on. I left, and bought the corn somewhere else at the old price. Refusal on the part of the customer to buy is the only way to make them stop it.
When times are bad, it simply makes no sense to pay for over-priced products. There's very little we can't do without for a while!
Of course, there is the obvious: do the necessary things to get better gas mileage, cook and eat at home, go back to doing personal things that mean something for the Holidays, etc. And, it won't kill you to do some of your shopping at K-Mart for a while, instead of Dillards.
You don't need me to tell you how to do the obvious. Be creative! The trick is simply to look at it as a temporary adjustment. Which, if you do it right - it is!
The Dreaded Budget
I know many folks hate budgets, but you can't run a successful business without one. The purpose of a budget is usually defeated because people think it involves depriving themselves. Well, yes - and no.
You'll need to keep the money flowing in and out, so your finances don't become stagnant. Movement is energy and energy creates. The trick is to put the money in the most advantageous places.
So, list all your regular payments and the dates they're due to be paid each month. Some payments fluctuate each month, and part of the game is to see how much you can get them down each month. Example: the electric bill.
In addition to regular expense, keep track, and make a list of, what you spend out of pocket - including with debit cards.
This list is also to get you to really study where your money goes. Once you have all that in front of you, you'll get a new perspective. You have more that you thought! And, you can cut WAY more excess than you thought!
Cut the Right Expenses
This is where nearly every client I had fell down on the job. They inevitably cut the wrong expenses.
For instance, I would often find no advertising budget and, upon questioning, the client would tell me,
We can't afford to advertise right now.
My response: NO, you can't afford NOT to advertise right now!
Write this down somewhere ... Cut NO expense that helps sales!
This is true for online businesses, too. Every expense you have for your web site that helps you make a sale, or look successful, must stay.
Increase Income
You have several ways to do this: raise your prices, add additional products, attract more customers. The easy way is to raise your prices. BUT - when the problem is the economy, that may drive potential customers away. They're having cash flow problems, too.
So, that leaves finding a way to increase your customer base and/or expand your line of products/services. Online, that may take advertising, or it may take increased search engine optimization. It might even take extra effort, such as writing articles and getting them out there with your attribution statement at the end.
Paying the Bills
ALWAYS make payments to your savings and debt first! Even if you think you can't afford to save, put a small amount aside anyway - just for the feel of it. It's amazing what it will do for your self-confidence as you see even a small amount grow.
Eat at home, then, take the amount you would have spent at restaurants, or on fast food, and put that amount away each week. You'll be AMAZED at what you save! Then, when you hit a certain pre-decided amount, treat yourself to ONE dinner out.
DO - always reward yourself. It will keep you motivated. Just don't over-do it! Set your goals high! And, remember, not all rewards have to cost money!
Paying your debt goes without saying. But, it's also important not to rack up NEW debt. Start looking at credit cards as something to be used for emergencies ONLY. And, I mean REAL emergencies!
Get into this mind-set: if you have to use a credit card for it, you don't need it! The idea is to use your cash flow - NOT drive up additional debt.
Stop and think before spending ANY money! Do you REALLY need this? Do you really need it right NOW? If not - walk away.
In a tanking economy, everyone has same problem. This is the time to make deals - barter - trade services. You won't know if it can be done if you don't ask. Since everyone has the same problem, there's certainly no shame in asking.
Things to Avoid
Many online businesses may have an added problem. The online business may be a sideline. The owner may also have to deal with an off-line job. This could actually give this person a leg up on the entire situation.
Yet, many will feel like they can't afford to maintain the online business. Whoa! Backward thinking! The online business is an additional asset many don't have. USE it!
NOW is the time to GROW that business. Now is NOT the time to see it as something you play with. Make it PAY!
The thing that may tempt you - and which you do NOT want to do - is get caught up in any get-rich-quick schemes. Scams and scammers run rampant during economic downturns.
They prey on people's desperation.
Never allow yourself to feel desperate. Make yourself a detailed plan. It's part of the game. Work that plan. Move forward with confidence. In fact, you can actually enjoy the game - and, if you do, you'll WIN!
* dr. jl scott is the Founder of the International Council of Online Professionals (iCop™) - and also the publisher of the Internet Marketing Trade Journal™ - the ezine that keeps you up to date on Internet marketing coming of age. Click Here for your subscription.
Reprinted with permission:My busiest time at all this was during the economic turn-down of the '80s and early '90s. So, I'm no stranger to knowing what to do when the economy goes south.
Before you can correct anything, you have to find out the problem. Obviously, not every company had the same problem - other than the basic one caused by low cash-flow.
In looking for the problems, I was able to see what GOT them into trouble. I discovered several things many folks do that increases the problem, rather than alleviating it. These particular things are nearly universal - everyone seems to do them.
So, I'm going to show you how to avoid these mistakes, STAY in business and come through the turn-down with a minimum of problems.
Let the Games Begin
Let me say, right up front, you will need to demonstrate some will-power. If you can't do that, you probably shouldn't be in business. But, there's an easy way to do that.
Think of saving your company as a game. When you win, you'll still be in business after the danger has passed - and after others have gone under.
Making it a game doesn't make it childish. It gives you focus which, in turn, keeps fear to a minimum. The thing you do NOT want to get bogged down in is fear, which can bring about the very thing you fear.
Instead, by focusing on the game, you keep moving forward in a positive direction. If things look rough, you go back to the game and find something else you can do.
I've gone through a couple of very bad times with iCop - once due to an economic turn-down, once due to other situations. But, each time, I just sucked it up and did what I had to do to take care of the company.
On one occasion, I had to make some serious financial cut backs. But, I lived through it and so did iCop! And, so will you.
As a turn-around specialist, I was right in the middle of things at the client company. I was into the books, so I could see where they needed to continue to spend money and where they needed to cut back. I'll have to leave it to YOU to make those decisions for yourself, based on what I tell you.
Expenses Will Need to be Cut ...
... both personal and business. Start with the personal. Remember - the business is the most important thing right now. We need to do whatever is necessary to STAY in business.
You don't need to do a lot of heavy deprivation. Start by cutting back the over-spending we've all been doing.
Dump Starbucks - that, in itself, will save a bundle over the course of a month, and you CAN still get a cup of coffee for under a buck! What the hell was ever cool about spending $4.75 for a cup of crappy coffee in the first place?
In fact, you may not have a choice on that one. I've heard that Starbucks is going down, but I don't have any sympathy for them. That place was the epitome of the nonsense of greed.
Speaking of that, you may have noticed, there's some price gouging going on right now. For instance, I went to the same place I've gone to buy corn for the ducks for four years. Within a month, the corn doubled in price!
Now, there is NOT a shortage of corn and they've been using it for ethanol for several years, so they had no excuse. So, why the big jump in a month? Price gouging. They think they can get away with it since everything else is going up, and people will just pay it.
The trick is - do NOT buy anything when looks as if price gouging is going on. I left, and bought the corn somewhere else at the old price. Refusal on the part of the customer to buy is the only way to make them stop it.
When times are bad, it simply makes no sense to pay for over-priced products. There's very little we can't do without for a while!
Of course, there is the obvious: do the necessary things to get better gas mileage, cook and eat at home, go back to doing personal things that mean something for the Holidays, etc. And, it won't kill you to do some of your shopping at K-Mart for a while, instead of Dillards.
You don't need me to tell you how to do the obvious. Be creative! The trick is simply to look at it as a temporary adjustment. Which, if you do it right - it is!
The Dreaded Budget
I know many folks hate budgets, but you can't run a successful business without one. The purpose of a budget is usually defeated because people think it involves depriving themselves. Well, yes - and no.
You'll need to keep the money flowing in and out, so your finances don't become stagnant. Movement is energy and energy creates. The trick is to put the money in the most advantageous places.
So, list all your regular payments and the dates they're due to be paid each month. Some payments fluctuate each month, and part of the game is to see how much you can get them down each month. Example: the electric bill.
In addition to regular expense, keep track, and make a list of, what you spend out of pocket - including with debit cards.
This list is also to get you to really study where your money goes. Once you have all that in front of you, you'll get a new perspective. You have more that you thought! And, you can cut WAY more excess than you thought!
Cut the Right Expenses
This is where nearly every client I had fell down on the job. They inevitably cut the wrong expenses.
For instance, I would often find no advertising budget and, upon questioning, the client would tell me,
We can't afford to advertise right now.
My response: NO, you can't afford NOT to advertise right now!
Write this down somewhere ... Cut NO expense that helps sales!
This is true for online businesses, too. Every expense you have for your web site that helps you make a sale, or look successful, must stay.
Increase Income
You have several ways to do this: raise your prices, add additional products, attract more customers. The easy way is to raise your prices. BUT - when the problem is the economy, that may drive potential customers away. They're having cash flow problems, too.
So, that leaves finding a way to increase your customer base and/or expand your line of products/services. Online, that may take advertising, or it may take increased search engine optimization. It might even take extra effort, such as writing articles and getting them out there with your attribution statement at the end.
Paying the Bills
ALWAYS make payments to your savings and debt first! Even if you think you can't afford to save, put a small amount aside anyway - just for the feel of it. It's amazing what it will do for your self-confidence as you see even a small amount grow.
Eat at home, then, take the amount you would have spent at restaurants, or on fast food, and put that amount away each week. You'll be AMAZED at what you save! Then, when you hit a certain pre-decided amount, treat yourself to ONE dinner out.
DO - always reward yourself. It will keep you motivated. Just don't over-do it! Set your goals high! And, remember, not all rewards have to cost money!
Paying your debt goes without saying. But, it's also important not to rack up NEW debt. Start looking at credit cards as something to be used for emergencies ONLY. And, I mean REAL emergencies!
Get into this mind-set: if you have to use a credit card for it, you don't need it! The idea is to use your cash flow - NOT drive up additional debt.
Stop and think before spending ANY money! Do you REALLY need this? Do you really need it right NOW? If not - walk away.
In a tanking economy, everyone has same problem. This is the time to make deals - barter - trade services. You won't know if it can be done if you don't ask. Since everyone has the same problem, there's certainly no shame in asking.
Things to Avoid
Many online businesses may have an added problem. The online business may be a sideline. The owner may also have to deal with an off-line job. This could actually give this person a leg up on the entire situation.
Yet, many will feel like they can't afford to maintain the online business. Whoa! Backward thinking! The online business is an additional asset many don't have. USE it!
NOW is the time to GROW that business. Now is NOT the time to see it as something you play with. Make it PAY!
The thing that may tempt you - and which you do NOT want to do - is get caught up in any get-rich-quick schemes. Scams and scammers run rampant during economic downturns.
They prey on people's desperation.
Never allow yourself to feel desperate. Make yourself a detailed plan. It's part of the game. Work that plan. Move forward with confidence. In fact, you can actually enjoy the game - and, if you do, you'll WIN!
* dr. jl scott is the Founder of the International Council of Online Professionals (iCop™) - and also the publisher of the Internet Marketing Trade Journal™ - the ezine that keeps you up to date on Internet marketing coming of age. Click Here for your subscription.
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