Business Strategy for Turning Lemons into Lemonade

Every economic climate has its gifts and its challenges.

The negatives - lower sales, decreased cash flow, and lower receivable and inventory turnover must be managed and monitored. Manage the challenges using tools such as appropriate credit policies, extended vendor terms, consistent and open communication with your bank, lowering margins where appropriate to maintain market share, and launching “can’t miss” new services or products. Monitor the challenges using tools such as cash flow projections, trailing 12 month KPIs (Key Performance Indicators), daily cash monitoring, weekly KPIs at the team and individual level, and relevant and timely internal financial statements.

Both management and monitoring are necessary. The biggest mistake I see small and mid-sized businesses make is their failure to monitor. When the going gets tough, the tendency is to make a knee-jerk reaction with blinders on, and then to wonder why the expected result was not achieved. My experience of monitoring is that it not only pays for itself, but it increases profitability, owner return and cash flow. If you do not have an effective monitoring program, our Shared CFO™ program is just the ticket to help you.

A) Identify what to monitor, based on your strategic objectives

B) Develop appropriate systems and procedures for tracking the success level of your management strategy.

The gifts of the recession take a bit more time to discover. And it takes strategic thinking to develop an action plan to take advantage of the gifts.

Let’s take a look at a few of the biggest gifts of the recession.First is the opportunity to upgrade your team. Good people are the life blood of any business. And over the last several years, recruiting good people has been a challenge. In many cases, even finding someone to work was difficult. The search and expectation for an excellent candidate was often reduced to searching for an adequate candidate. With unemployment rates up and rising, now is the time to assess weak team members, free them up to find a new path, and move your company ahead with a re-energized top-tier team. Jim Collins, in his landmark book Good to Great, calls it “getting the right people on the bus.”

Second, look at the opportunity to lock in lease rates at rock bottom prices. Or if you have the capital and cash flow, look for your own building. Real estate is being offered at record low prices, and you can use this to gain a competitive advantage for years to come.

Third, if you are adequately capitalized, you should be able to find financing for projects over the next six to twelve months. The exception appears to be speculative real estate where credit markets are all but dried up. Now is the time to assess your fixed asset needs and to take advantage of rock bottom prices, extended terms and to lock in favorable long term interest rates.Finally, upgrade your technology. Buyers are in short supply everywhere, so if you have the cash flow to support a technology upgrade, software or hardware, now is a good time to consider it.

If you don’t have the funds now, but know you need to upgrade, use this time to assess your needs, sort through your options and get your decision in hand so you are ready to buy when cash flow eases.

Now is the time to be strategic, and to build your foundation for the recovery.
Our Shared CFO™ program offers an affordable, variable cost solution to managing and monitoring recessionary challenges, as well as taking advantage of the strategic opportunities.

May prosperity be yours,

Mackey McNeill, CPA/PFS
President and CEO

Mackey Advisors

www.CultivatingProsperity.com