How to survive when times get tough
At K Magill & Company we can provide businesses with support and advice on a wide range of business issues. Here are some thoughts on staying afloat in tough economic times...
It is important for all businesses, especially small and medium-sized enterprises, to be properly prepared for difficult times.
You need to plan on two levels: in the short-term, you must ensure that you have the resources and flexibility to manage short-term fluctuations. Now might not be the best time to expand or to hire additional staff. But in the long-term, you need to focus on being in a position of strength when the economy improves again.
This is essential - you can soon run into trouble if you let debts mount up, a problem which is all the more likely in lean times. Make sure you have a clear policy for collecting debts, which customers are aware of, and above all, make sure you enforce it. Pursue outstanding debts by letter and telephone, and threaten legal action if you have to.
If your terms of business allow for adding interest on overdue accounts (they should, and at a good rate), add it. If your terms set credit limits, stick to them and stop supplying as credit limits are reached or bills go unpaid.
Keep your customers loyal
In difficult times it becomes harder to attract new customers. Therefore it is more important than ever to maintain loyalty among your existing ones. Consider ways of developing and rewarding customer loyalty - selected discounts (especially for early payment, or cash with order), regular mailings, loyalty cards and so on.
Beware of cutting prices
If sales begin to taper off, it can be tempting to cut prices. But this can be a mistake. Cutting prices can have the negative long-term effect of cheapening your image in the marketplace. Remember that suppliers might also raise their prices, so try to negotiate a long-term discount with them.
Don't neglect marketing
Don't fall into the trap of cutting back on your marketing budget when cash flow is tight - it is a false economy. In tough times the marketplace becomes more competitive - you may need to market more vigorously, not less. If you do not have a strategic marketing plan, now is the time to draw one up.
Concentrate on your key employees
The wage bill is the largest area of expenditure for most businesses, and often the first target for cutbacks when times are hard. But you should always try to keep your key employees: their strengths will help you through any tough time, and you will need them again when business picks up. You could consider flexible working arrangements, or contracting out under-used staff. Cross-train employees now, so that if you do have to lose people the remaining staff will be able to cover for them.
Planning is vital for the success of your business. You need to plan what changes can be made to strengthen your business against tough times, and how to put those changes into action. But planning is not just about "worst case scenarios" - we can help you plan for your business future with advice on business management, business finances and personal financial planning to help you, your business and your family be financially successful, whatever the future holds.
It is essential to take proper professional advice to pre-empt any problems that may arise in an economic downturn. Contact us today, and we'll help you through the difficult times.
If you are looking for assistance from experienced accountants and business advisers, contact K Magill & Company.