How to manage a business during turnaround time. 3 steps away from the bottom chapter 2
3 steps away from the bottom chapter 2
Now that you have taken necessary steps for your business to turn around (stages 1 – 3 on the first chapter of the 3 steps away from the bottom). You need to stay on course thus keep making the right decisions all the time since your business will be as good as new. Some small operating decisions can have far reaching results for hence the need to remember the following.
Step 4- Avoid capital expenditure
The period at which you are struggling to stay afloat is not the period for you to change your vehicle as the boss or to get rid of that nagging laptop. Whenever there is a business and people the pressure to spend will always be there and realistic. A good manager needs to act as someone fully informed on the performance of the business. The bottom line is buy only when necessary and refrain from activities that might result in an increased demand for cash or borrowings. Probably the business is renting a bigger space than necessary, so its not always a good start to behave as if things are normal by re-furnishing your big offices that might be requiring reduction in times of stress.
Step 5-limit borrowing loans and try to generate revenue
We can borrow till we can’t borrow as a company and we can do it with a sense of joy for easy money but every debt is a trap. No matter how easy loans might seem, they are a burden to the business and they are damn expensive. Never wondered why banks make more money than many industries? Its because we are all obsessed with borrowing. I will borrow to start a business only if my model assures me that I will be able to repay the debt without borrowing again. I have seen companies borrowing to finance a debt and this is a sign of a system seriously gone wrong. Depending on the economy, I advise zero borrowings when you are recovering because you will work for interest. And because humans tend to have an abusive approach to borrowed money. A loan should be treated as expenditure when ever it has to be considered. Instead of running around trying to find a loan I suggest you work overtime trying to find a best way of generating revenue for your company. Aim for profitable turnover figure and avoid running companies with old ideas of high turnover high profit and so on. Is your market in a position to consume all your product with the given reporting period. How many re-orders are we talking about? If the economy is also struggling then low policies related to low turnover should be the option. I have seen some business putting everything on high turnover when in actual sense their markets could only absorb half of their monthly targets. The end result would be high costs and less revenue and more need for loans to finance day to day running of the business. Smart managers study their environment and make informed decisions
Step 6 –Balance business terms
A business interacts with the suppliers on one side and the customers on the other. It won’t make sense to give favorable terms say 3 month credit to your customers whilst your suppliers sell to you on cash basis. What this means is you might find yourself financing both your suppliers and customers simply because you have not taken some time to think. Yes there is a likelihood of this given the existence of departmental competition within one company. Because your marketing department wants to push volumes they might negotiate bad terms with customers to clear your stock and because your purchasing department does not want to delay production they might end up being pushed by suppliers. Have a policy which is clear to everyone and ensure that your managers do not compete to destroy recovery.
This chapter 2 will see you taking the necessary early control on the recovery of your business and chapter 3 will dwell on further steps to ensure a health recovery. The businessman never rest because business never ends.