A business survives on cash. Making sales may be the objective, but if you don’t collect the cash from a sale in the appropriate amount of time, then making a sale is not enough. A sale needs to be profitable, and that includes a factor for contributing to a cash-positive position for the business. This requires an ability to recognize that there is a need for the business to make sales in which the client is capable of paying, on-time and in full. This is the true cycle of a sustainable, profitable business.
Hidden in the Heights? The Depths
All too often businesses get caught up in the top-line numbers: “How big is the sales number this month?” “How big is the market share?” “How big is the business?” “How big are we growing?” These numbers are frequently measured in terms of sales dollars. And in a great economy where credit is readily available and business is good, sales may be king, because all the little “issues” of the business may be hidden by the heights of the markets, the fast pace of how everything is running, and how much business everyone is doing. The focus stays on growth, growth, growth!
Then things slow down or—even worse—suddenly and drastically take a massive downturn. It’s like seeing the water level drop and the rocks and sand bars, shoals, and reefs rise from the depths … all the hazards and issues of the business oceans and waterways are revealed. The tide of the “good times” that was so high suddenly isn’t there, and all of those things you were floating over have come to the surface.
You may have been conservative in your practices (at least compared with everyone else), but suddenly you are faced with customers that can’t or won’t pay. You’re stuck with credit card debts with interest rates that used to be loan shark rates (or would have at least put most loan sharks to shame). And the banks, those bastions of dark suit conservativism, may as well have been playing the ponies at Churchill Downs or the slots in Vegas. What to do now?
The Best of Times, or The Worst of Times: What We Make of It
It is what it is. Now we not only have to live with it, but survive it and come through with stronger, more nimble and capable companies. We have to learn that a successful business isn’t just about sales; it’s about a whole lot of other numbers, too. We have to understand our business, our customers’ businesses, and become business specialists who are able to pull all the pieces of the complex puzzle of competing in today’s markets’ (economic, governmental, and world) ever-changing perspective into a proactive, dynamic plan of action. To quote Charles Dickens from A Tale of Two Cities:
“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us …”
As business owners, it is what we will make of it.
Honing the Business
The first reaction is usually to cut costs. But which costs? I remember working for a company that was having significant profitability and revenue issues. The first costs they cut? The free coffee for the employees. That’s great if you are a small company, but this was a nearly one-billion-dollars-a-year manufacturing operation! Cutting the free coffee was like holding up a stop sign in front of the bulls running down the streets of Pamplona. The next step was eliminating 33% of the trained implementation team for the new computer system. Did I mention they had only trained 5% of the existing workforce to use the new system?
There were wiser alternatives, like discontinuing orders of excess and obsolete inventory. The company was ordering excess and obsolete inventory, every day; day in and day out; week after week; month after month. The business increased the amount of inventory it invested in that it would NEVER use. But instead of stopping that, let’s not provide coffee and lay off trained, critical staff. Makes sense, right?
Appropriate Rapidness, Not Undue Haste
When the economy or any other aspect of the business environment impacts the business, it is important to act quickly and not react poorly (or should I say “unwisely” … I admit to coming close to saying “stupidly,” but I didn’t). It is important to quickly assess the business to see where the core of the business and its activities are. Determine where the money-making capability is, what is truly profitable and capable of being made or kept profitable and cash positive. After these assessments are made, then make business-changing and sustainability-altering decisions. The decisions you make today have long reaching and capacity implications far beyond the moment. Make each decision with short-term and long-term perspectives in mind. Think strategically before you act, and act with appropriate rapidness, just not undue haste.
Copyright ©2008 Lea A. Strickland, F.O.C.U.S. Resource, Inc.
All Rights Reserved