Surviving Tough Times

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Houston Chapter

The EnvironmentThe Environment

Credit is tightCredit is tight

Stock market has collapsedStock market has collapsed

Unemployment is risingUnemployment is rising

Consumers are spending lessConsumers are spending less

A steady stream of bad news…A steady stream of bad news…

In the best of times, In the best of times, 40,000 businesses 40,000 businesses

fail each yearfail each year

Impacts on Small BusinessesImpacts on Small Businesses

Fewer customers with less dollars to spendFewer customers with less dollars to spend

Greater competition for their dollarsGreater competition for their dollars

Rising debt; loans difficult to obtainRising debt; loans difficult to obtain

Business becomes unpredictableBusiness becomes unpredictable

Warning SignsWarning Signs

– Can’t pay monthly billsCan’t pay monthly bills

– No profit at month endNo profit at month end

– No paycheck at month endNo paycheck at month end

– Inventory accumulatingInventory accumulating

– Buying patterns changingBuying patterns changing

Danger

What are the Options?What are the Options?

Reduce costs and Increase RevenuesReduce costs and Increase Revenues

Revenues

Expenses

First StepsFirst Steps

Do worst case forecast for next 12 months; Focus Do worst case forecast for next 12 months; Focus on the next three to six monthson the next three to six months

List steps required to stay solventList steps required to stay solvent

List actions to address 5 largest expensesList actions to address 5 largest expenses– Be severe, its much easier to cut hard once than multiple timesBe severe, its much easier to cut hard once than multiple times– Do not assume that sales growth will save you. It never doesDo not assume that sales growth will save you. It never does

Review your Business PlanReview your Business Plan– Product mix, Location, Appearance, Pricing, StructureProduct mix, Location, Appearance, Pricing, Structure– Identify why your customers like to do business with you and do more of Identify why your customers like to do business with you and do more of

thatthat– Identify key personnel and make sure they stay happyIdentify key personnel and make sure they stay happy

Get help from an objective 3rd partyGet help from an objective 3rd party– Accountant, Lenders, SCOREAccountant, Lenders, SCORE

Stop the BleedingStop the Bleeding

Owners review all expenditures & sign all checksOwners review all expenditures & sign all checks Monitor all expenses closelyMonitor all expenses closely Review cash flow for next 3-6 monthsReview cash flow for next 3-6 months Assign one employee to collect past due accounts; Assign one employee to collect past due accounts;

consider factoringconsider factoring Secure extended payment terms from suppliers; Secure extended payment terms from suppliers;

consider purchasing via company credit cardconsider purchasing via company credit card Prune excess/obsolete inventoryPrune excess/obsolete inventory Secure line of credit for unforeseen expensesSecure line of credit for unforeseen expenses Reduce employees hoursReduce employees hours

Increase RevenuesIncrease Revenues

Assess the marketplace for changesAssess the marketplace for changes

Apply extra effort to see if what worked before is Apply extra effort to see if what worked before is likely to work again; if not, adapt likely to work again; if not, adapt

Revisit old sales leads Revisit old sales leads

Consider increasing your marketing budget and Consider increasing your marketing budget and try new approachestry new approaches

Bundle products; provide special sales offerings Bundle products; provide special sales offerings or more attractive pricingor more attractive pricing

Expand product line or geographic reach; buy Expand product line or geographic reach; buy out struggling competitorsout struggling competitors

DownsizeDownsize

Downsize office; Reduce all office expendituresDownsize office; Reduce all office expenditures

Reduce wagesReduce wages

Reduce employeesReduce employees

Eliminate slow moving inventoryEliminate slow moving inventory

Review advertising and reduce if possibleReview advertising and reduce if possible

Get help from objective 3Get help from objective 3rdrd party to determine if party to determine if can survive the recessioncan survive the recession

If you cannot maintain your debt levels, If you cannot maintain your debt levels, develop a restructuring plandevelop a restructuring plan

Restructure DebtRestructure Debt

If you can afford to pay off past due debts over If you can afford to pay off past due debts over the next three months, you can handle the debtthe next three months, you can handle the debt

If you need six months to pay off these debts, If you need six months to pay off these debts, you can probably negotiate with your creditorsyou can probably negotiate with your creditors

If you need one year to pay off debts, you need If you need one year to pay off debts, you need a restructuring plana restructuring plan

If you need more than one year, seek If you need more than one year, seek professional helpprofessional help

A Settlement Proposal Needs:A Settlement Proposal Needs:

A hardship cover letter – summarizes the problemA hardship cover letter – summarizes the problem

A payment plan proposal – offers alternative payment optionsA payment plan proposal – offers alternative payment options

A business history profile – summarizes causes, extenuating A business history profile – summarizes causes, extenuating circumstances and actions circumstances and actions

Source: Corporate Turnaround (www.CompanyDebts.com)

Be StrongBe Strong

Be mentally prepared to handle unexpected Be mentally prepared to handle unexpected eventsevents

Maintain good physical & mental healthMaintain good physical & mental health

Include the familyInclude the family

Communicate, Communicate, CommunicateCommunicate, Communicate, Communicate

People, including creditors, follow leaders People, including creditors, follow leaders not victimsnot victims

SummarySummary

Think strategically; act tacticallyThink strategically; act tactically– Focus on the next three to six monthsFocus on the next three to six months– Reduce Costs AND increase marketing focusReduce Costs AND increase marketing focus

Aggressively attack expensesAggressively attack expenses– Focus on the five largest expense itemsFocus on the five largest expense items

Centralize control of expendituresCentralize control of expenditures

Make time to increase marketingMake time to increase marketing

Get help – See SCORE!Get help – See SCORE!

SCORE®Counselors to America’s Small Business

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8701 S. Gessner #12008701 S. Gessner #1200www.scorehouston.orgwww.scorehouston.org

713-773-6565713-773-6565

Come inCome inforfor

Free CounselingFree Counseling

8701 S. Gessner #12008701 S. Gessner #1200www.scorehouston.orgwww.scorehouston.org

713-773-6565713-773-6565