August 17, 2019, Small Business Needs Even though the big investors are betting for the music to stop with a global downturn, there is a way to keep dancing and weather the storm. They could be wrong about the recession. John Lennon said, “life is what happens when you are busy making other plans”. Although I believe in this adage as well (my creative right side of my brain is to blame), the left side of my brain, the analytical and methodical side, has some tips for the new headwinds.
How to weather the global downturn:
Become digital savvy – this downturn will be different from 2008, companies that lag on digital maturity will lose their market share to their savvy peers.
Don’t lay off your employees – skills shortages and resilient aging boomers are not going away; when the economy recovers you don’t want to be scrambling for the right people.
Don’t make knee-jerk reactions such as sweeping cuts – identify what needs to change and work hard to find the true value of the business.
Pay down debt – in the 2008 downturn the companies that weathered the storm best were already paying down their debt in 2007, and when the recovery was under way, they had cash for bargains.
Begin each day with morning cash/balance sheet meeting at which management reviews cash positions and discusses immediate cash needs.
Review the TD1 form with your employees in January 2020 so that their tax deductions are less and their take home pay is higher.
Don’t slash prices – consider bundling products and services together to make them appealing to customers, and be creative about your offerings.
Extend better payment terms with customers, but don’t let customers stall on payments.
Communicate with customers; listen to them, use surveys, improve your existing products and services, and develop new ones.
Diversify your customer base – are all your eggs in one basket?
Negotiate better payment terms with your suppliers, as this is a form of free financing.
Don’t keep slow moving stock that ties up your working capital.
Stay close to your team – managers who aren’t scared of the status quo and have new ideas, your banker, lawyer, and accountant and investment advisor.
Two days ago my investment advisor reminded me that today’s negative yield curve (where longer term interest rates fall below shorter-term interest rates forecasting a recession) did not lead to a recession in the mid-60s. Fifty years after Woodstock (August 15 – August 17, 1969), what else have we learned? There could be enough for everyone. Someone does not have to lose for someone to gain. Find new moves in your playbook. And the most important lesson: People like free stuff!