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10 Tips To Weather a Stormy Business Climate

With businesses nationwide struggling to cope with the effects of a downturn in the economy, Tatum CFO Partners, LLP has compiled tips for companies challenged by the current climate.

The following suggestions, offered by the firm's veteran chief financial officers, are designed to help minimize negative effects and enable companies to emerge as survivors on the other side of the downturn.

1.     Rethink your business model. Re-examine your customers, consider their changed needs, and take the opportunity to capture new markets for your products and services. When the real estate market soured in the 1980s, many companies and individuals adapted by turning to bankruptcy assistance and other strategies. Follow the example of the high-end construction company that developed a series of lower-priced, standard designs to expand its customer base.

2.     Optimize working capital. Pay extra attention to credit and collections. Reduce receivables, manage payables and decrease inventories. 1) Query major customers to find out whether they anticipate delays in payment. 2) Contact suppliers to negotiate extended payment terms. 3) Cancel any outstanding purchases that are not essential. 4) Recognize all possible expenses and losses. Don't be shy about appropriate write-offs -- including divisions and locations that no longer make economic sense.

3.     Examine all costs and operating expenses. Eliminate any that aren't profitable, or don't add value from a customer's perspective. Don't cut back on what differentiates your products and/or services. There may be a hidden opportunity if your competitors cut costs that lower their service level or product quality and you can continue yours or -- even better -- improve it. Don't cut capital spending designed to improve productivity or R&D spending on new product development.

4.     Re-examine your debt and capital structure. Meet with key lenders to review your financial forecast. Know where you stand with them, and make sure their expectations are not too high. With interest rates falling, consider new debt structures to reduce interest expenses, improve cash flow, and provide credit for acquisitions. Lenders and investors may also be more amenable to restructurings they would never consider in better times.

5.     Quality and customer support. Companies with a reputation for having quality products and services always come to mind first when a buying decision is being made. It is always good business to maintain a strong and comprehensive focus on quality and customer service. In challenging times, it is an imperative.

6.     Reach out to others and reaffirm existing relationships. Even in the most difficult of periods, core marketing and relationship maintenance are essential to business recovery. Do not curtail sales and marketing expenditures. Your competitors most likely will do so, giving you an opportunity to increase market share when others are losing theirs.

7.      Keep the lines of communication open. Nothing is worse than keeping employees, customers, suppliers and investors guessing about the company's plans and actions during a time of uncertainty. Communicate good news, bad news, plans, changes in plans, reasons for plans/actions, successes, failures, etc. Deal with reality -- don't paint a rosy picture for your board and lenders. Credibility later will count for a lot.

8.     Focus on your employee team. Don't automatically lay off large numbers of employees when times get tough. Remember that a football team doesn't downsize to eight players when the game turns against them. The best teams dig in, and everyone works harder to make success happen. Instead of layoffs, consider pay cuts, reduced hours, and revised incentive pay plans. Align employee goals with the company goals by using creative compensation programs, so you can retain skilled employees for a quick start in the next upturn. Companies that cripple themselves by cutting into muscle will be slow out of the blocks when the new cycle begins.

9.     Remember the people side of the business. Recognize that a down economy takes a toll on the psyche, and make an effort to retain a positive attitude. Realize that no downturn lasts forever, and that most fears are never realized. And help your employee team recognize the same realities. Don't hide in your office -- walk around and talk with your workers. Make them true members of your team, keep them informed, solicit their best ideas, and help them see the light at the end of the tunnel.

10.  Don't overreact and don't under react. Times of economic stress are like driving a car in an ice storm: Jerk the steering wheel one way or the other, and you can find yourself in an irreversible spin. On the other hand, if you aren't looking ahead far enough or proceeding with increased caution, you won't be able to avoid the hazards in your path. And if you're just sitting still, you won't be able to get moving in time to avoid the hazards coming at you.

Tatum CFO Partners and its recently established Tatum CIO Partners offer experienced partners as permanent CFOs and CIOs, respectively, for companies at all stages. The Atlanta-based firm has more than 400 CFO and CIO partners in 25 cities nationwide. The flexible business model enables lower-risk employment contracts and permits interim part-time and project services in addition to permanent employment. Additionally, it gives clients access to the intellectual capital and best practices of a national firm. For information, contact the corporate office at (800) 828-8623 or visit the Web site at http://www.tatumcfo.com.

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