We are finally seeing signs that we are coming out of the recession. Consumer confidence is turning around and companies have generally reached the bottom of their layoffs and resizing. Too many are still in the cost cutting mode and will struggle for some time, if indeed they make it at all. Others are planning on what they should be doing to fully take advantage of the recovery.
Maver Management Group has been working with a number of companies to assist them in their survival and turnaround and they are now positioned for growth. Based on our experience and the lists we have reviewed from various sources, we offer the following to you for successfully coming out of the recession,
1. Review Your Strategic Plan. Make certain that it is relevant for today. Examine your objectives and goals and then insure that the strategies you will follow will deliver those desired results. Importantly, make certain that the resources you have will support the strategies and are focused so that you get maximum impact from each.
2. Identify and Maintain Your Strengths. Identify the strengths that have driven your success to date and those that will be important in the future. Which capabilities and skills are most critical? What distinguishes your ability to serve customers most effectively? Focus on these and invest in them heavily.
3. Identify Your Best Customers. This doesn’t mean your largest customers necessarily, but your best customers. Identify your highest-margin customers, and understand what you are "doing right" for them. Develop a game plan to protect and build on the strengths that have allowed you to be indispensable to these customers. Rather than cutting costs across the board, think about how you can shift resources to retain these high-margin customers, and attract more customers like them.
4. Capture Market Share. Recessions reshape industries faster than good times, creating opportunities for those with the vision and ability to seize them quickly. Studies have shown that companies have twice the opportunity to change their relative position in an industry during a recession, compared to growth times. Keep an eye on competitors, and stand ready to capture market share as other players allow cost cutting to damage their service and quality or fail outright.
5. Manage Cash Flow. Your company has been dealing not only with negative growth but also with liquidity constraints. During good times you may not have obtained sufficient lines of credit to sustain your company through economic adversity. Trying to maintain liquidity on a smaller revenue base can be crippling. Your cash flow has been positively affected by reduced Accounts Receivables and lower inventory from the lower volume of products being sold. Now you will need to plan for increases in both probably at a rate in advance of your revenue growth. Build on the new processes that you have put in place during the downturn so that you keep inventories tight and maintain faster collections of AR.
6. Keep Core Activities In-House, and Outsource Everything Else. Build and protect those "core" capabilities that differentiate you, while aggressively outsourcing anything non-core. Depending on your business, non-core activities may include IT maintenance, human resources administration, benefits and payroll, accounts receivable and payable, manufacturing, distribution or sales. You'll get the benefit of service provider expertise and economies of scale and will pay only for services you need. The biggest benefit of outsourcing, however, is that it shifts your focus, resources and capital toward serving your clients' higher value needs and building your competitive advantage.
7. Create New Metrics and Manage by Them. Tight economics put a premium on your ability to understand the relationships between revenues, costs and margins. Think about metrics that focus on the building blocks of revenue and sustaining market share, including sales pipeline, customer satisfaction, pricing and market penetration. Metrics should look beyond core financials to provide management with insight into market dynamics, such as market share trends.
8. Communicate and Reenergize. The recession has been a time of turmoil for all of the company stakeholders. You now need to begin the process of re-energizing your employees and creating new trust among all your constituencies. Frequent and honest communication will go a long way toward maintaining a calm and motivated workforce. Studies show that employees are motivated far more by a sense of shared purpose than by compensation. Create that shared purpose and reinforce it daily.
The changing economic climate has created many opportunities. It has also created many potential pitfalls. Contact us, if we can help guide you to success in capitalizing on the opportunities and avoiding the pitfalls.
Maver Management Group