By Kevin Cole, ISFA Director of Communications For the most part, countertop/surfacing
businesses were declared “essential” as part of the construction industry, but there’s no doubt the overall economy is already in a recession.
Recession
Survival
Knowing for how long is difficult to answer.
Thankfully, with a mild winter, the first two months of the year fared well. However, in March, things
stalled out, with many states going into lock-down mode and people being forced to focus on their health instead of their economic welfare.
Most economists have said that barring further
T I PS would likely rather you stay
at a lower payment than have to try to find a new renter.
disasters we’re facing a short-term recession,
Seek to extend terms on other payables, or
and much healthier by the end of 2021. That
to your vendors, who may also be struggling,
strategic approach to staying stable during
cash on hand could be key to survival. If they’re
and things will be better by the end of the year
negotiate discounts on faster payments. Talk
said, it’s critical businesses take a level and
to see if they can extend your terms. The extra
challenging times.
not able to extend payment terms, maybe they’ll
Now that most states are beginning to reopen,
more people are returning to work, which will put money back into the economy and shorten the
length of the downturn. But, there are some critical things to do to ensure a solid future. Cash Flow During a recession, cash flow is critical to
longevity. A business must have more coming in than it has going out. That means reducing
monthly expenses while also trying to increase incoming funds. Monitoring cash flow and
calculating monthly expenses vs. expenditures
may help gains outweigh losses. Look ahead two
to four months, to get a good handle on where you will be going forward.
Focus on core competencies and what your business does best to carry you through a
recession. Stick to these products and services,
and scale back on less profitable, weaker areas. Wasting money on areas with lower margins or
lesser demand puts you at risk for lowering cash on hand to outlast a downturn.
Focusing on what you do best can also lower
inventory costs. Don’t tie up cash in inventory on products that don’t align with the biggest
share of your business. Lower your inventory so you have what you need when it comes to best
sellers, but don’t overstock less used products. Also look at increasing the number of deliveries
so your operation is based more on just-in-time shipments.
If you’re leasing your building, talk to your
landlord to see if you can get a lower payment. This may require signing a longer lease, but
could be worth it. During a recession, a landlord 26 • Vol. 13 / Issue 2 • International Surface Fabricators Association
give you a discount for paying quicker. Even 2 to 4 percent can add up to significant savings
over a year. If your vendors won’t work with you, talk to alternative suppliers to see if they’ll offer
incentives. At the very least, avoid paying until the due date to keep more cash on hand.
Talk to utility companies to see if there are
discounts available. Sometimes a call is all it
takes. For those companies that won’t work with you, talk to their competitors to see if they have
incentives for switching service. Many companies will offer discounts for the first year, which can
make a big difference when it comes to outlasting a downturn.
After cutting expenses, work to increase the speed of receivables. When business is good, collections often become lax, so become more aggressive
collecting, while avoiding hostile techniques that could kill good business. Being the squeaky
wheel, albeit friendly and understanding, can help keep you a top priority for them.
You may also want to consider small (1 or 2
percent) discounts for customers that pay within 10 days to keep inflows steady. While you may be giving up a small bit of profit, if your team is spending more time trying to collect, it likely is
Employees People are an expensive part of running a business, but also provide a lot of the value. Increasing productivity while cutting labor costs is tricky. After coming off of record lows in unemployment, the last thing you want to do is get rid of employees you worked so hard to get and train, so if possible avoid layoffs. Be honest with your staff, let them know they are important and you are in this together. Transparency with the financial overview of the business can go a long way in developing a team culture and motivating them to work harder. No one wants to lose their job in uncertain times. Also, make sure to involve them when developing solutions to problems that arise. This helps emphasize their importance and creates a team spirit. You may find you have some previously undiscovered and creative leaders. Also, it keeps you away from overly authoritative management styles and encourages workers to contribute their expertise, becoming part of the solution. The knowledge of their roles in the company may lead to innovations that can’t be seen by higher level managers, and acknowledging their value can improve both morale and productivity. Employees should be involved in policy choices, tactics and implementation. If work cutbacks are unavoidable, having employees take a role in developing a solution will make it easier for them to accept and may yield alternatives you hadn’t considered. Generally speaking, it’s a good idea to reduce hours before cutting pay. This should start with overtime. Beyond that, if you ask employees to work the same hours for less pay, they will likely feel shorted and it could lessen their productivity. If you cut their hours instead, you’ll save the same amount of money, but have a better chance to keep their productivity up. Another thing to consider is cutting your own salary before cutting those of your staff. When you are sacrificing as much as they are, they are less likely to focus on their losses and more impressed that you are doing everything you can to keep them employed.
costing you more than you lose.
Marketing
While you may want to strengthen your
Many companies cut advertising budgets rather than fixed costs during downturns. However, studies show that those who maintain or even increase marketing during slowdowns end up outselling rivals who cut back. During a recession, it’s critical to stay in front of customers. If competitors are cutting marketing, seriously consider increasing yours to capture a larger market share.
relationships with lenders, most experts agree
that you should avoid asking for additional credit unless absolutely necessary. Instead show your bank the changes you’ve made to improve
your financial position, just in case. Overall, you are better off taking advantage of government
assistance programs (the sooner the better) or applying for small business grants.
