No matter how you look at it, the global economy isn’t at its best. With falling stock markets, declining commodities and double-digit losses, it can be a nerve-wracking time to own a company. Though the economy isn’t something business owners can control, an effective contingency plan can help leaders steer their company through an economic downturn. To begin preparing your own contingency strategy, ask yourself these critical questions:
What do our high-margin customers love about us?
Identify your most valuable customers. Pinpoint what they love most about your company. What keeps them coming back? That’s what you need to invest in and further develop.
In times of uncertainty, it’s critical that you focus your resources on delighting your faithful customers. They’re the ones who’ll keep you afloat.
What can we stop doing?
In the face of an economic downturn, it’s critical to make the necessary changes to your cost structure. This means eliminating anything that’s not directly improving your value proposition or pleasing your key customers.
Reevaluate your expenses. Are there functions that could be outsourced, such as HR, payroll or finance? If you’re already outsourcing certain functions, consider renegotiating costs.
Does our profit plan have some wiggle room?
Without a buffer plan, even a small loss in revenue could devastate your bottom line. It’s essential to build in some margin for error. Create forecasts for best-case, realistic and worst-case scenarios. Agree on the early warning signs that will indicate when each should be put into place.
How can we manage cash more tightly?
When times get tough, companies need to take a long, hard look at their cash conversion cycle. If it’s too many days, it’s costing your company in critical ways.
Seek new ways to shorten the cycle and reach greater efficiency. Don’t be afraid to be aggressive. A stringent approach now will pay off in the future.
Helping you succeed
Whether the economy is strong or struggling, Countybank’s relationship managers are always finding new ways to help you reach your goals. From business loans to commercial real estate, we’re your single-source financial solution. Call us at 864-335-2440.
Note: “Fresh Ideas” are published each week by Countybank and its family of financial service companies. With financial centers in Greenville and Greenwood, Countybank has a team of highly engaged professionals ready to bring a full scope of financial solutions designed to help families and business owners reach their goals.