How to Survive the Quiet Times and Benefit from the Experience Part 1
Change is inevitable and quite often unforeseeable. Quiet times can hit us when we least expect it. The cancellation of a big project, a big customer leaves or road works commence that make your shop inaccessible. The unexpected can catch us all.
If this ever happens to your business, the important thing is not to panic. Turn this kind of situation on its head and treat it as an opportunity. Leverage the quiet time to work on, rather than in your business, to achieve positive outcomes.
A good way of going about this is to consider the 3C’s of surviving the quiet times, Costs, Cash flow and Cultivation. Let’s see what that really means.
When reviewing your costs it’s important to distinguish between the different types of costs, being particularly critical of what, if anything, they are contributing to the business.
As Andy Brown, Business Services Partner at Johnston Grocke advises, “When times are tough you need to try and determine whether a cost is simply a cost or an investment. If it’s an investment, then it should be providing a return. If not, then it’s just a cost and may be cut without further notice to give you some breathing space. Unfortunately though, some costs are necessary for the running of the business and just have to be paid.”
- Cash Flow
Failing to properly manage cash flow is a common cause of business failure and in quiet times, cash flow management becomes even more critical. Simon Rodger, Business Advisor at Johnston Grocke shares some of his cash flow experience;
“Mid-Season Sale – is a common term in the retail industry when demand between season dries up and retailers strike back with bright red and orange signs to lure customers into their shops.
In service industries it can be a little harder to fight back. Reoccurring income such as monthly retainers may work for both business and customer. Installing monthly or quarterly fees for regular customers, could help in times of stagnation.
Do consider changing your terms from say 30 days to 7 days. This will help you collect your money quicker and keep the wolf from the door.
Do not ever offer after pay terms if you are likely to experience quiet times – that would just worsen your cash flow situation. On the other hand, a short solution would be deferring your payments to non-critical contractors. Using the belated pay option with your suppliers could buy you some time to identify alternate lines of credit or sources of cash flow.
You might also want to check on your debtors. If not already in place, consider penalising late payments. If monetary penalties are unlikely to work for certain debtors, what about debt factoring?
The advantage of debt factoring is that you immediately (within 24 to 48 hours), receive cash from the factor, instead of waiting for your customers to pay overdue amounts. There is a fee for this service, but if you need to urgently pay some bills or repair critical equipment, then this may represent an attractive solution.
It’s also worth reviewing your financial facilities. Your loan structure might allow you to access more funds for a slight increase in your interest rate.”
- Cultivating Customers, Colleagues and Staff
Use the quiet time to talk to customers, colleagues and staff and benefit from their engagement. How often do you normally get the chance to sit down with these important people and discuss;
- Business improvement initiatives
- Ideas for new products and services
- Product or service improvements
- Your competitors
- Lead generation opportunities
Customers, colleagues and staff not only appreciate being asked to offer ideas but more often than not, find the experience quite motivating. And don’t be surprised if some of those ideas translate into additional profits.
So do make sure that you make good use of the quieter times, should they occur, and capitalise on the many opportunities to work on your business with the help of those around you.
If you would like any help in exploring some of the opportunities we have discussed, please don’t hesitate to give us a call at Johnston Grocke on 8303 0300 for the very best advice.