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Steps to jump-start the recovery

Actions you can take to improve your business now

by Joan Adams

The economy is "recovering" so they say. Frankly, from where I sit, it feels pretty
stagnant. We may have hit the bottom of the trough and are on the way up (albeit very slowly) but there is still a pervasive fog of inactivity everywhere I look. No one is doing anything, business owners feel trapped by circumstances, forces and events totally out of their control. Thus paralyzed, they find themselves passively waiting, waiting, waiting for something to turn this all around. Waiting isn't going to get it done – taking action will.

It's true; you don't have control of the economy (though what goes down will eventually come back up). You do have control of any of a number of things. How you act on those will make the difference in how you come out of this terrible two to three-year stretch. This is more than figuring out how to survive; you want to come out of this strong.

There's actually some good news here. First, tough times are tough on everybody – it is an equal opportunity business killer. Your competitors are not having a good time, so this may be an opportunity to pry some customers away. Vendors are getting beat up – now could be your opportunity to forge some very lasting and profitable partnerships. Your customers are also having a lousy time of it. This would be the moment in which you help them out. And lastly, "Times are tough" is a really good excuse to do all sorts of things. Downtimes are the perfect opportunities to clean house, take an axe to unnecessary spending and all those other unpopular but necessary actions.

Start with cleaning house
Employees: When business is good, you need all your people, so you might tolerate a few less than productive employees. But not now. There are boatloads of people, eminently qualified (and over qualified) looking for work. It's time for an upgrade. Dump those non-stellar performers and hire people who can really help your business.

Let's say you have a great team and you don't want to lose any of them. You still can't afford to have folks sitting around. Introduce flex time – reduce hours to a 35-hour week. People will be happier and more accepting of fewer hours knowing that they are still employed.

Slow times are also perfect times to upgrade your employees' skill sets. It's tough to take classes when you are putting in a 60- to 70-hour week. Send some of your people to school; it will pay you back handsomely when we finally pull out of this ditch.

Find some in-house projects you never had time to complete when work was really busy. Clean out the warehouse, paint the breakroom and get old records and files scanned and into the computer system. Clean up the database; do a full inventory count. There's always stuff that needs to get done. Get it done now.

Look at your top 10 expense categories and set about cutting each by 5%; that will instantly put a little cash in your pocket. Health insurance, phone, warehouse rent, truck insurance are all negotiable. Call up each company for every big-ticket item on the list and negotiate.

With a little extra cash flow, now you can think about investing in things that will improve your company's performance and viability going forward. My favorite upgrades are computers, tools and employees.

Example 1: Install bar code readers and thus have real-time inventory tracking.

Results:

• Better customer service (improved picking accuracy)

• Fewer stock outs while carrying less inventory (now that will make both your customers and your cash flow happy)

• Improved insight into what products are moving and what products are not.

Example 2: Upgrade the Web site

• Offer items on sale

• Post your real-time inventory

• Allow "registered" customers to order online

• Set up an online system for blanket and repeat orders

Results:
Free up the sale force's time. They can spend more time selling to new clients instead of writing orders over the phone or desperately trying to decipher a fax order.

Customers: Your customers are hurting, too. Often, when times are sour, customer relationships become adversarial (each transaction becomes a fight for every dollar, where there is always a winner and a loser). It doesn't have to be that way. There are creative ways to conduct your business such that both you and the customer win.

Example 1: Make fewer deliveries a week (this saves you gas, driving time, etc.), and cut that customer a price break (meaning you both get to keep a dollar).

Example 2: Maybe their guys are also a little under-worked – get them to help unload the truck, making turnaround time much faster.

Example 3: When the customer pays upon delivery, he / she gets a small reduction in price.

In short, customers want good reliable service. The more you can customize your services to suit their needs, the more loyal they will be to your business. Partnering with them to help reduce both of your costs is a sure winner.

Vendors: You can pursue a similar strategy with your vendors. There are plenty of ways that working together, you and your vendors can both reduce costs.

Think about delivery schedules, payment, vendor-managed inventory. Talk with your vendors – find out how you can make it easier to do business with you. Customers who are easy to deal with can negotiate from strength when it comes to discounts.

Perquisites: If these haven't been dumped already, it's banishment time. Company cars, golfing outings and all those other freebies you lavish on employees and customers are not what make the distribution world go around. Your customers won't desert you because you aren't having your annual outing.

Asset management: Lastly, everyone thinks cutting costs is the only way to ride out a recession. While it is certainly a good idea, you cannot save your way to prosperity even in the best of times.

Managing the asset side of the balance sheet is another factor to consider. Rent out space in your warehouse. No takers? Then shut down a section (lowers heating and lighting bills), lease trucks instead of buying, reduce
inventory carried.

The moral of the story is short but sweet. By simply doing nothing, you are actually falling behind. So, do something! And you might as well do something that gets you closer to your customers and vendors, reduces costs, invests in your company and your employees, and frees up time and cash.

Good luck and see you in the recovery!

Joan S. Adams has consulted for industrial clients for more than 20 years. She operates Pierian, a consultancy that brings sustained and measurable success through operational excellence, customer focus and competitive market strategy. She has engineering degrees from the UW-Madison and MIT. E-mail her at adams@pierian.net.

This article originally appeared in the Nov./Dec. 2010 issue of Industrial Supply magazine. Copyright 2010, Direct Business Media.

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