In an up-economy businesses tend to drive sales and in a down economy focus on cutting costs
A very broad statement I know but eerily consistent with some of the conversations I have had in recent times. They go like this, we know we need to look at such things as our processes and documentation or revisit our long term vision or but right now we need to focus on handling all the sales that keep coming at us, after all we took it in the chin during the last recession.
The problem with this approach is that when that when a dip in the economy does come around, or you are looking to engage in a transaction you are not prepared for it. We are not saying there is another recession around the corner but at the very least there will probably be a correction and then further expansion for a number of years much as in the 1980 -1999 economy when we had a major correction in 1987 with a drop in the market of 20+% on Black Monday and an ensuing soft economy for 18 months.
Over the coming weeks, I will be sharing a series of articles that will outline some of the things you should focus on
1.Timing –implementing change ahead of the cycle not behind it
More commonly than not, business owners are implementing strategies behind these cycles instead of getting in front of them. The opportunity rests with being able to see when these cycles come into play in an economy and investing in our businesses accordingly. So, if we think that we are in for a correction for example, then what should we do now?
– Maybe hold some cash back for arising opportunities?
– Review your organization and grade your employees A, B, C etc. to get a current picture of who are your ‘keepers”. Companies should be doing this but right now many are too busy to do this, and low unemployment makes this less appealing.
– Are the numbers running the business? A question to ask yourself is do I have a good handle on cash. I am sure you know what your profit is but have you a documented cash flow system? Have you a good handle on what the capacity of the business is?
– If you are thinking about an exit strategy, then if there is a correction, only best of breed will be acquired. Are you a P&L business or are you an asset-based business? It is important to understand the difference. Asset based businesses will sell for a higher multiple, so what assets do you have, or could you develop.
Many companies have been ramping up sales which is a growth strategy, now it is time to focus on platform. Imagine a building that has had numerous expansions and upgrades, but nothing has been done to the foundation and infrastructure. In the long term those buildings could implode. The same can be said about business, you need to look at the infrastructure and right now there should be a huge focus on human capital upgrades
– Training. Improving skills usually makes a business more efficient. These may be technical skills or business skills like sales to help win more clients. Sir Richard Branson says train people well enough to leave but treat them well enough to stay. Never be afraid to provide employees with additional skills, you will get a massive return on your investment.
– Functionality. Reviewing roles and responsibilities, so all important tasks are done easily and on time, with no duplication. We will dive deeper into this one in a later article.
– Scheduling. If your industry has monthly, annual or multi-year cycles, how do you manage those?
– Monitoring KPIs. Identifying the source factors which contribute to your business success and tracking those for improvement. Employers have become lax, afraid to upset employees lest they leave but without accountability productivity and morale will dip.
– Accounting Management. Budget preparation and management reports. As discussed earlier you must both budget and monitor progress against forecasts AND make swift adjustments.
Culture is the glue that holds a business together, but we are seeing signs that business owners are not maintaining the culture. Bit by bit they are allowing things to erode, letting things go because it is “easier” to do so. Culture is a living breathing organism and needs to be fed. Some tips.
– You have values and behaviors but are you holding people accountable if they do not live up to these AND praising people who do demonstrate these behaviors. Lack of accountability is probably the number one issue.
– Hire right. You can train someone to have the skills necessary to do his or her job, but you can never change someone’s attitude. Make sure the people you hire fit your culture and long-term vision for the organization.
– Conduct weekly one-on-one check-ins with employees rather than yearly reviews. It takes some extra time and energy but keeps the team focused and feeling valued. Traditional evaluations tend to focus on the past, millennials and future generations are more likely to want to focus on the future and what is needed to get to the next level.
So whether it is timing, platform versus growth or culture, there are steps to prepare your business for its next phase. Are you ready?
At Catandra, we scale businesses by drawing on the experience of owning and running businesses and the Shirlaws IP to develop a vision and appropriate strategies and a coaching modality to transfer skills into the business.