Ten Steps to Improve Your Company Now
Right now, our world is in for a tough ride. Sunnier days will come and now is the time to prepare. During my first business turnaround, my mentor tried to reassure me with a Freudian slip: “It’ll get painful before it gets worse.” I knew what he meant to say, but realized the accuracy of his statement.
Since then I have returned five gift/décor businesses to profitability. Along the way I learned many tricks and have seen the same patterns repeated. Following are ideas to help you get through the coming year:
1. Hoard your cash. When times are tough, cash is the only thing that matters – more than profits, vision, strategies, new products, etc. I once had core revenues drop 75 percent in three years. What I had left was cash, a business – and a future.
Follow two rules. Rule 1: Take back the checkbook and P.O. book; controlling cash flow is the quickest way to understand your business. Rule 2: Call every customer who owes you money and get paid quicker. Or as a friend advises: Never spend more in a week than you started with on Monday.
2. Find your core. Somewhere, you have a profitable business glowing like an ember in the coals. Find that ember and tend to it. Everything that is unprofitable now will probably remain that way in 12 months. Cut losses today, rather than wait.
3. Take care of yourself. Mentally, physically and financially. I’ve seen business owners suffer nervous breakdowns, lose their health or end up broke by not protecting their savings.
You may have gotten into trouble without the help of experienced professionals, but it is unlikely you will get out of trouble that way. I found direction, and humor, from a Will Rogers quip: “If stupidity got us into this mess, why can’t it get us out?”
4. Prune SKUs. Pareto was brilliant: Eighty percent of everything really does come from about 20 percent of something else. Very few SKUs are paying their way; the rest need to be cut. A product that is not paying for itself within six months is a dog. In good times we have reasons for carrying extra items; focus now on your profitable core.
5. Mind your margins. You need 65 percent to survive in the specialty retail channels. People make it work with less but you’ll never flourish with a fully loaded COGS (cost-of-goods-sold) over 35 percent.
6. Use the phone. Call your customers. Find out what’s going on, why they haven’t purchased lately, why they are paying slower. What might spur them to buy deeper? Customers are the most important part of taking back control of your business. Please don’t outsource those relationships.
7. Hold prices, dump inventory. Contradictory advice. To clarify: If an item hasn’t sold in six months, dump it. Be known for hot new product that sells through. Offer elite customers first dibs at the best deals.
8. Plan and time promotions. Our retail customers are great at promotions, we can learn a lot from them. Plan and time promotions properly; your results can double. This is simply working smarter, not harder.
9. Study. There are many books, articles and courses to guide you through the process. I’ve been recommending a new online turnaround course to friends. Also, there are five stages of a turnaround and they provide encouraging guideposts along the way.
10. Keep your poise. “Adversity doesn’t build character, it reveals character.” No matter how hard it is, maintain your poise. I watched a CEO lash out days before significant layoffs. In 20 minutes, he burned the respect of those who would be leaving and the commitment of those who stayed.
It may indeed get painful before it gets worse. Find your ember of hope and profitability and protect it no matter what. Brighter days are ahead if you make the right moves now.
Jeff Sands is a director with Transitional Strategies Inc. (TSI), www.tsiadvisors.com, an advisory firm focused on operational turnarounds, financial restructurings and M&A Advisory.
This article was first published in Gifts & Decorative Accessories and is reprinted with permission.