I hate to state it again because we all know it already: 2009 was a rotten year for most, with very limited cash available to do anything. The media and consumer confidence indexes, though, suggest that things are turning around – spending has increased, money is coming in the door, and receivables are decreasing rather than increasing. Yet some financial experts still project a “correction” sometime in 2010. As business owners, we want to be confident, we want to be growing… but having been burned badly over the past 18 months, we’re very reluctant to jump in feet-first. Last year proved that we needed money in the bank. Yet growth requires us to spend toward marketing, increasing inventory and capital expenditures. What’s a company to do?
1. Marketing. It is critical to be “out there” and “on message” in this climate. You want to reach your target customers in a way that they hear you over the din of the others. Invest time in understanding your company’s vision, mission, target customers, and messaging so you can connect with them every time. From there, take advantage of the amazing results that can be accomplished through inexpensive or free marketing tools available. These include do-it-yourself public relations, e-zines, newsletters, and social networking. Determine how to reach your target customers using these tools and learn about best practices to maximize your efforts. These efforts will take time (a precious resource) but not a lot of cash (a more precious resource in most cases) and, if done thoughtfully and strategically, will generate results for your business.
2. Savings. When contemplating expenditures to fund growth, make sure your business maintains a certain buffer of cash. The companies that suffered most during the downturn did not have sufficient (if any) savings to buffer against the impact of the recession. If we find ourselves in a 2010 “correction,” we can expect at least a few months’ impact to business activities. Have 3 months worth of expenses in cash that can support the short term business needs should you need it.
3. Cash Flow. A critical part of managing cash is to monitor cash flow constantly. If you have debt or high accounts payable figures, consider how you might negotiate payments to better match your receivables. Another simple solution that many businesses neglect is to bill customers for products and services provided and offer incentives to pay early. A classic example is that credit cards often cost a business in processing charges but results in much more rapid payment by customers. Also consider other ways to ensure you are paid including personal guarantees and maintaining credit cards on file for customers.
4. Operations. To keep the savings on track, you must find the cash for growth from other parts of your business. Take a careful look at where you can shave off costs to become a leaner, meaner organization – even if you think you’ve already shaved to the bone, take a second look or, better yet, get a third party to do so. You might be surprised at what they’ll find.
5. Legal. Legal planning is an important tool in driving growth into a business. Firstly, corporate structure, insurance and contracts all work together to protect the business from potential risks and the owners from the risks associated with the business. These are easy yet critical steps to protecting a business in any type of market. Secondly, business relationships are the most substantial risks businesses face. Each critical relationship should be documented to outline the roles and responsibilities of the parties and to limit the possibility of disputes turning into costly litigation. The planning part is typically not overly expensive and the cost of executing the plan can often be managed over time to manage budgeting against business need.
My experience with clients and my own business generated these ideas for you. Each week during February, we’ll have a guest blogger share their knowledge and experience in each of these areas to offer you additional insights and thoughts on how to move from survival to robust growth to stand out from the crowd in 2010!