“What doesn’t kill us makes us stronger”
— Friedrich Nietzsche
Entrepreneurs are optimists. They are comfortable with the unknown – otherwise they wouldn’t be entrepreneurs selling themselves, growing their ideas and taking chances.
But even though entrepreneurs are used to the wild roller coaster ride, the fact is that most of the time they are going up, not down – and certainly not down, down, down the way things are trending in our current recession. In fact, the state of the economy has many entrepreneurs thinking about turning in their thrill ride tickets for something more like the kiddie coaster.
The wisdom of the day tells us that to get through this recession, we need to hunker down, preserve cash and make tough decisions. We’re in difficult economic times and, let’s face it, some business are not going to survive.
But bailing out of the entrepreneurial adventure is not the answer.
Instead, it’s time to ask, what can entrepreneurs do to stay on track, heal their wounded psyches and get back to kicking butt? How can they ensure they’re in the percentage of companies that survive and, even better, in the elite percentage that grow?
Here’s what every entrepreneur needs to know and do to become stronger thanks to the icky economy:
Everyone knows cash is king. This is even more true now. You can no longer depend on the bank to fund your shortfalls or future business growth. You need cash now – and if you don’t have it, you have to get it and get it fast.
Cash accumulates from strong management of profits and astute management of receivables and payables. I won’t belabor this point as I’ve written about it before, but suffice it to say that prudence is the word of the day. Miserly is good word, too. Whatever you call it, keep your cash through careful management. If you haven’t read my prior newsletters about managing cash properly, let me know and I’ll forward them to you – and fast.
Action Step #1: I want to see you building cash reserves now more than ever.
Many advisors have spoken about cutting costs, and yes, we do need to do that. But before you cut half your staff, have you analyzed the following key sales and marketing success indicators:
— Is your sales team and marketing engine is working optimally?
— Do you have a pipeline?
— Is your team held accountable for your volume of sales?
— Have you listened to what your customers are saying about the quality of your work?
— Would your customers recommend you to others?
The bottom line is that you need to make sure your sales and marketing process is working as efficiently as possible. You must take advantage of every possible opportunity out there. You need to be better than the competition.
Action Step #2: I want you to review your sales and marketing processes and get them in ship-shape, agile enough to dive into any opportunity without delay.
Once you’ve tuned up your sales and marketing processes, it’s time to turn toward projections. Many of my service industry clients use a simple tool I’ve developed called the CCF Projector (customer cash flow projector). CCF ties three critical projection components together for analyzing cash needs:
1. Your sales pipeline for the upcoming quarter.
2. Income generated from current clients.
3. Your business’s monthly “nut” or average monthly expenses.
Using the CCF tool lets entrepreneurs know if their pipeline can support their current level of staffing and overhead. Because it’s forward-looking, you’ll also be able to make cuts more readily if you see a downward pattern.
Action Step #3: Don’t rely only on today’s data – I want you to look forward so that you can move quickly in response to the changing business environment.
A Final Note: There are opportunities in every environment. Even this one. Entrepreneurs don’t need to feel rocked and they definitely don’t need to lose their positive outlook. They simply need to plan ahead.
Think about it. If you’ve done the right things and your business is doing well despite the economy, you may be in a position to acquire your suffering competition. If you plan ahead, you can remain adaptable and you can take advantage of opportunities your competition can not. Most importantly, if you aren’t afraid to do the hard work of saving cash, analyzing your sales and marketing and looking forward to see your growth or retraction, you will be ready for anything.
And that’s what the whole entrepreneur attitude is really about – being positioned to leap when others are too scared or blind to take a risk. After all, with this kind of approach, it’s not really a risk at all. It’s just smart business.
On The Homefront
Believe it or not, this may be an excellent time to renovate a room in your home or build an addition. That’s because the formerly very expensive construction industry is now the very desperate construction industry. Many contractors are looking for work and you can help them (and you) out by moving forward with your renovation project.
Just remember: If up-front deposits are required, make sure to check out the stability of your contractor before you cut a check – in fact, check out anyone you are doing business with right now. They may be struggling too and you don’t want to be left in the lurch.