Most businesses are beginning to recover from “The Great Recession”. However, how many business owners are proactively planning for the recovery? “Plan for a recovery?”, you may ask. Don’t you just need to get through the downturn and when things get better the ship rights itself automatically? Sometimes that’s the case but in some situations a recovery can lead to a business failing. By now you’re probably quite confused so let me explain.
When a company has been through a prolonged recession such as the one we are just now emerging from head counts have been reduced, training has been suspended, inventories have been lowered, investment in technology has been postponed, maintenance may have been delayed on capital equipment and vehicles, and sometimes even more drastic measures have been taken such a closing one or more locations. When sales revenue start to rise again holes can appear in the business to where your business looks like Swiss cheese.
Like a scuba diver that comes up too fast and gets the bends, a business can recover too fast and experience significant problems. Here are a few tips to ease the pain of recovery.
- Do a thorough cash flow analysis. Either you or you and your CFO/controller should forecast various sales increase levels, as at some levels you may be exceeding your available credit. If you sit down with your banker now and share those projections with him or her your banker ought to be impressed with your foresight. This should help in getting an increased credit line. Bankers like planners and if they can take your business plan to their credit committee and show them that you are more on top of things than their average customer, this can significantly help your chances of getting an increased credit line.
- Plan to increase your staff. Post openings with local colleges, community colleges, trade schools, and the like and begin gathering resumes. You may also want to post job openings with Internet-based job sites such as Career Builder and Monster. Even if you aren’t ready to hire just yet you should at least begin building your bench by posting openings and weeding out resumes that don’t meet your requirements and keeping those that do. Then when you’re ready to start hiring you’re several steps ahead of the game.
- Review your use of technology. Are you one or more releases behind on the software you use in your business because you stopped spending money on software upgrades during the recession? Did you stop software support and enhancement contracts? Is your operating system out of date? Is your computer hardware held together with glue and string? All of the above needs to be reviewed and a timetable established to bring your use of technology current. You don’t want to have business pickup and your systems start failing you.
- Review the condition of the vehicles used in your business. If your business uses delivery trucks, company cars, forklifts, and the like, a thorough review of all of the preceding should be done. If you’re like most businesses you probably stopped buying new vehicles and made do with what you had. Now is the time to review all of your vehicles and come up with a plan to replace or perform maintenance on all of your vehicles over the next year or two. Your business can be significantly hurt if, when business picks up, you don’t regularly deliver on time because your vehicles are breaking down.
- Review your business premises. Did you stop painting your buildings, did you let your landscaping go, does the interior of your business need a fresh coat of paint, new carpet or flooring, etc. Again, most businesses stopped spending money on cosmetics and your business may be looking a little worse for wear. Put together a plan to spruce up the interior and exterior of your business over the next six months to a year.
- Training. One of the first things to fall under the budget ax is training. However, if you forgo training for your staff for too long a period of time you may be penny wise and pound foolish. I’ve always thought that the axiom, “If you think training is expensive, try ignorance”, was very true. Review all of your associates and come up with a list of who needs what training and get that scheduled over the next year or so.
- Insurance coverage. Did you cut back your coverage to save money during the recession? Do you need to let your insurance broker know that your sales and inventories are increasing so that you are properly insured? Did you drop some coverage such as business interruption insurance and errors and omission insurance? Did the value of your property drop but you are still paying for insurance at the old value? Ask your insurance broker to meet with you to review your full portfolio of insurance and make sure that all of your policies are up to date and reflect your current revenues and inventory levels.
- Employee benefits. Did you cut back or eliminate benefits during the downturn? Most businesses did. Now is the time to review your entire portfolio of benefits so that you have a competitive offering as you begin hiring again. We were in a buyer’s market when it came to hiring over the last several years but that’s about to change. Not having a competitive package of benefits may keep you from hiring stars that can make a major difference in your business.
As I said at the beginning, like the hull of a ship that hasn’t undergone regular maintenance and then gets sent back to sea to run a heavy schedule, holes can emerge in your business that can be fatal. These problems can be avoided with proper planning and now is the time to start if you haven’t already. Did I miss anything? If so, let me know.
© Copyright 2011 by Jim Sobeck. All rights reserved. This information may be reproduced as long as full credit is given to the author.