I remember reading a quote that said “it is not necessarily the best or the brightest people who succeed but the ones that are most adaptable to change who succeed.” There is no doubt that in this current economy, it will be the adaptable business owners that succeed.
If you are looking in your rear-view mirror to drive your business, be prepared to crash. What worked for your business yesterday may not work for you today.
Some business owners are struggling to figure out how they need to change to adjust to this market. However, many business owners know what needs to be done but are hesitant to make the tough decisions. This can be their ultimate undoing.
Your business needs leadership now more than ever. So take a realistic look at your business’ situation and take action. Look at your company’s financial statements and review its financial performance.
If you see that you need to make cuts in overhead, just do it. Don’t wait until you run out of cash. Start slowing the cash outflows today.
Most business owners hate to make the tough choice of reducing their payroll. However, if revenues are not there to support the overhead, then it may be a necessary action.
When possible, ask the employees if they are all willing to take a percentage pay cut “across the board,” with all employees taking the same percentage reduction. Let them know that if they aren’t willing to take a pay reduction there will be a reduction of the number of employees.
If you use this tactic to reduce overhead, it is important that you lead by example and cut your salary (if you are lucky enough to still have a salary). Unfortunately, some owners will need to let some employees go and reduce salaries of the remaining employees.
Try to look at unique ways to reduce your overhead. Are there opportunities to share expenses? Is there some “extra space” that you can lease to another small business? How about sharing a booth at the trade show? Can you think of ways to share marketing expenses?
After you have done all that you can do to conserve your cash by reducing expenses, you need to look at opportunities to deal with declining revenue.
Create new vision
It may be the time to create a new vision for your company. Are there new market opportunities for your business? Can you offer a different version of your products or services that would better suit the current market conditions?
Remember, change can be positive but painful. People naturally are resistant to change, so it will be up to you to lead your employees through the changes. Effective and open communication is essential.
Business owners today are trying to figure out how to bring in more customers, but now may be the time to “fire some customers.” If you have high-maintenance customers who take a lot of attention but don’t yield the revenue to support that level of service, now may be the time to charge them more.
If they don’t want to pay more, then they will have to go elsewhere. Having customers go elsewhere is usually not desirable, but it can keep your employees working on more productive tasks. And this is especially important if you now have fewer employees as a result of your cost-cutting efforts.
Again, it will be up to you to keep the forward momentum in your business. You need to develop a plan that will help your company meet the current challenges in the market place. You need to make the tough choices, communicate openly and honestly with your employees, and make the necessary changes so your business adapts to today’s changing economy.
Lynn Vos is area director of the University of Georgia’s Small Business Development Center. Contact her at 651-3200.