Today's Guest Post
by R. Scott MacGregor
10/16/2009
An old English proverb that is reborn with each challenging era seems again to be the motto for those with nerve: "Smooth seas do not make skillful sailors." I work in an ultra-highly leveraged business where a small slip in receivables or a contraction in a financing line could slam the doors shut. It's exciting in an up market, and a wild ride in a down one. Bigger and better companies have fallen recently, because a loan that had been renewed easily over lunch in the past was suddenly called, or customers disappeared faster than home equity. This past year we cut our sales by half — yet profits are up a little and optimism is up a lot. Call it nerve, or the thrill of a salty crew sailing a rapid current. It's a great time of opportunity; here are four lessons from our journey through the maelstrom.
1. Captain with optimism. People are looking for bright spots &mdash so be one. Customers, co-workers and business partners don't need someone to confirm their fears; they need to hear "This is good because…" They'll feed off of you, and become their own beacons. It can't be false or cynical optimism. True optimism in dark times begins with personal responsibility. Sure, we are all victims of the stormy environment, but we chose our own paths; we saved, borrowed, grew, innovated – or we didn't. So choose to make the best of the situation and lead as many forward as you can.
2. Mind your station. This is the time to focus on what works, to become more disciplined and competent. This is the perfect opportunity to re-examine our key drivers — what we do well, what we do profitably, and what our customers like best about us — and to focus on those. Our company cut our sales by half, by focusing on the 20% of our marketing and distribution channels that were proven to be the most efficient and effective, and eliminating the rest.
3. Find safe harbors – or be one. Understand that all businesses are experiencing the same environment, but all may be experiencing it differently. Some of our vendors and business partners are less affected by prevailing economic winds than others; some are better positioned to weather the storm. Support those who need you, and lean on those that can offer some support. Some of our smaller vendors, especially the sole proprietors and family operations, provide critical products and services and are greatly affected when their payments are late. Have candid and regular conversations with your vendors, and let them know what you're doing — then follow through. Pay the smaller vendors first, in full every week. They'll really appreciate it more than you know, and will respond in kind when the seas calm. Bigger businesses will appreciate it if you let them know in advance that you need to stretch your payment or credit terms. They'll appreciate your continued business, and your candor about needing a little extra consideration.
4. Use reserve rations wisely — but use them. These are rainy days, so the reserves set aside for that purpose are in high demand. Certainly, conserving reserve assets is a wise discipline, and with the horizon not yet clearly visible, the most sensible of us will use resources sparingly to make sure they last as long as possible. But it may also be a time to grab rare opportunities. Cash is king, and when the lights all come back on, those that used it — and their nerve — to obtain assets at a discount will begin to enjoy high returns on those investments.
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