businessfirst…Find the Road Back to Stability and Profitability

The recent collapse of the energy giant Enron is a painful reminder that organizations of any size can get into trouble. The difficulties that a business or non-profit might experience can take many forms; they include declining revenues, loss of customers or clients, increasing costs, low employee morale, and slow response in providing a product or a service.

How does an organization begin the process of getting out of trouble?

The key first step is that the owners and/or managers must recognize that there is a problem, that it did not develop overnight, and that there is no single cause for it. The “single cause” theory may be the most obvious or most irritating, but it is usually symptomatic of some broader based and more deeply rooted problem or set of problems.

The second step is to review your business and strategic plans. Have you been following them? If you haven’t, or don’t have such plans at all, this could be a major contributor to your problem. The third step is to clearly define the scope of the problem. To do this effectively, you must assess your entire organization—and not skimp on the analysis. It’s the most important piece of your problem solving and if done properly, will lead to sound decision-making.

Examine all systems, all processes, all departments, programs, services and product lines. Break down all of your business operations into their component parts, examine each component in detail, and analyze how each one relates to the other components in the process. Don’t forget to look outward as well as inward: evaluate what and how your competitors are doing and survey your customers.

Don’t forget about your employees: it is vital that you bring them into the process. After all, this is their business, too; and they know a great deal about it. Many—if not all—of them know what the problems are and probably have some very good ideas about how to solve them. If you involve them from the very beginning, they will also “buy into” the solution and help fix the problems with enthusiasm and determination.

Once you have figured out what the issues are, the fourth step is to prioritize them. Some problem areas will be amenable to a quick fix, while other solutions will have to be phased in over time.

What are some specific actions you can take to deal with specific problems?

Expenses outstripping revenues

Are your expenditures out of line with your revenues? If so, then you must examine possible cost-cutting measures. While reducing staff or freezing wages might be tempting, take a close look at your daily, weekly, monthly and annual operating costs first.

Analyze how you use your telephones. Can you cut local and long-distance telephone charges with a different plan or another carrier? Look at your firm’s system of purchasing supplies. Are you taking advantage of volume discounts? If you share a building with other businesses, ask if they want to participate in a joint purchasing program.

Can you defer any proposed equipment purchases for another quarter, another year, or indefinitely? Get rid of your company credit cards. They are just too convenient and tend to be over used. Create a purchase order system or a pre-approved expenditure plan. You will be surprised at how much money can be saved.

Revisit your insurance and employee benefit plans. Even if your policies are not up for renewal for six months or more, start shopping around now. Keep your property and equipment inventory up to date. Be sure that equipment you have disposed of is not still being insured. If you are renting your space, talk with your landlord about the possibility of a temporary rent reduction or even a short term abatement of rent until conditions improve for your business.

Finally, look at planned wage/salary increases; they may have to be deferred for the foreseeable future. Explain this freeze to your staff in an honest and forthright manner. Most employees will understand the situation, will appreciate being able to keep their jobs, and will be more accepting of pay freezes or even pay cuts than cuts in benefits.

Loss of customers and market share

If you have lost customers and market share, then it becomes critical to find out why. Survey your customers and look at what your competitors are up to. Why have your customers left you? Have your competitors introduced new products and services, or reduced their prices? Have they responded to changes in your industry or the economy that you have ignored? Have they embarked on new marketing or PR efforts that have brought them recognition? If so, then you will have to do some rethinking. Even in tough economic times, you must find ways to keep your name out there” so that when the economy improves, your customers will have you in mind.

Sandra L. Cody and Rick Draker are president and chief operating officer; respectively, of Resources for Excellence Inc, an Albuquerque management-consulting firm working with businesses, non-profits and government agencies on the best practices to develop effective people and processes, attain efficient performance and build growing profits. Reach them at 323-1415 or www.resourcesforexcellence.com