Tips For Survival In An Economic Downturn
How To Be More Profitable/Successful
Plus, How To Control Costs And Remain Competitive
In The Face Of Recession
To be successful, a company must focus as many of its resources as possible on the business itself, its core competencies and revenue generating activities. Whilst the company’s underlying infrastructure is necessary for doing business it does not directly produce revenue.
The `bottom line` is that if a company can minimise the costs of doing business and maximise the focus of its resources on its core competency, then the company will be more profitable and successful. As such, it makes sense to examine infrastructure related expenses, and see if they can be reduced through outsourcing. Often at times, an outsourcing company can provide a better service than what can be provided in house, but at a lower cost, with efficiency + effect and with less complexity. This not only reduces costs, but it also frees up staff to focus on the company's business objectives. This will increase sales and net profit.
As critical as email is to most companies, it is important to remember that a company's mail servers are a part of the company's infrastructure, and are not usually directly related to the products or services that the company offers to its customers. However, without email, a company can also grind to a halt, with orders not being received and important communication not getting through. It therefore makes the most sense to outsource the company’s email solution to an experienced provider to manage. Although the reasons behind this choice are mostly financial, businesses find the ability to shift the responsibility of operations as well as the responsibility of complying with various federal regulations more to their benefit. This will be very successful and reduce costs plus gain efficiencies.
For example Microsoft Exchange Server (the most widely deployed business email solution) is one of the most complex Microsoft products ... With complexity, comes cost due to the expertise and support required to keep it running smoothly. Alongside this comes the initial hardware acquisition costs, and the cost of the Windows and Exchange Server licenses paid to Microsoft. More costs come in the form of spare parts, overtime for the administrative staff, especially if you want 24x7 reliability, and other maintenance related expenses.
Outsourcing your mailboxes to a Mail Hosting company not only allows you to avoid the initial start up costs of deploying an Exchange Server, but the ongoing costs are usually less as well. The reason why this is possible is because Mail Hosting companies typically divide server resources among multiple clients. This means that several companies are sharing the expense of the hardware, software, as well as monitoring and maintenance costs, rather than your company having to cover the entire costs.
Other benefits include:
• Reliability - hosting companies have the resources to have a fully redundant and clustered environment
• Disaster recovery - hosting companies are more likely to have a significant backups set up on a regular basis, so if disaster strikes data can be restored quickly and efficiently
• Regulations - regarding the security, management, and retention of email. Complying with these regulations is as tedious as it is expensive, with a hosting company able to do it for you!
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Tips For Survival In An Economic Downturn
1. CASH IS KING
Manage cash - if you are out of cash and out of credit, you are out of business. You need a good 13 week cash forecast, generated NOT from the income statement but from a detailed understanding of receipts and disbursements. Monitor trends in your cash flow to keep on top of any sticky situations.
2. COLLECT WITH PASSION
On a related point, manage receivables aggressively. Businesses are holding on to their cash longer than before, resulting in late payments. These late payments are having a ripple effect through the SME community. Receivables will trend up, and some of your customers may become troubled as well. Don't keep extending credit. Right now you should invest into the business model `Be Paid On Time` MasterClass Model.
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3. DON’T DEPEND ON ANYONE
Keep a close eye on your suppliers, and have alternatives. In a downturn, some of your suppliers may become troubled as well, and you need to think about alternative sources for your critical inputs.
4. YOU CAN ALWAYS CUT MORE
You can forecast expenses, you cannot forecast revenue. Look for places to cut expenses. When times are good, companies tend to add staff and expenses that are nice to have, but not critical. It’s time to take a fresh look at those.
Keep focus on core markets and spend money solely in those areas. Avoid putting cash and time into areas that have proven less profitable.
Many companies begin by cutting advertising / marketing budgets. This can be a mistake. Instead of cutting these budgets, review the methods you are using. Are there more cost effective routes to market? Does your current strategy bring in the right results? If not, rework your efforts to deliver the best possible results.
If you have debt financing, stay in communication with your creditors. Do not wait until it’s too late before speaking with your lender. When you are already in a crisis and haven't provided any warnings, situations may prove tricky. Maintain constant communication. It will help you should you ever need to renegotiate terms.
6. BUSINESS SURVIVES ON THE BOTTOM LINE. NOT THE TOP LINE
Do not worry about growing revenue. Worry about growing profit.... Make sure you understand what drives profitability in your business. To spur demand, you may have to get creative with pricing and product offerings, and you do not want to put something out there that is actually unprofitable.
Consider diversifying to make the most of potential opportunities. Others’ weaknesses and instability could work to your advantage. You never know – you may identify a new market.
Also, take on board a Non Executive Director with skills, experience and wisdom who has been successful in business. This is an investment not a cost!
How To Control Costs And Remain Competitive In The Face Of Recession
As the global economy stares in the face of recession, small businesses are trying to keep their heads above water. The dilemma is trying to control costs while also ensuring they remain competitive.
The first areas where budgets are cut is often IT and technology or marketing, however both are part of the life-blood that keeps businesses running. Without marketing how can you, as a small business, grow? And without IT and technology, you may become inefficient, slow and unresponsive. Therefore the challenge faced by small businesses is how to invest sensibly, while also being efficient and cost-effective. It sounds like a contradiction, but it is possible!
A web presence is part of both of these functions: Marketing as it is the face of your business and most often a source of revenue whether directly or indirectly; and IT, as your website is only working for your business, when it is live – if a website fails then it will cost you awareness as well as online sales. For a small business your website is even more important, it is an opportunity for you to compete on a level playing field alongside larger competitors. A small business can have a `big reach` if you optimise your website and providing it is always available.
It is the technology piece in particular, of creating and managing a hosting solution for your website (or any online application) that can be a major challenge for small businesses. The decision on how to host your website is very important. Hosting it yourself may appear to be a low cost solution initially, but when you consider the capital outlay for hardware, plus the technical ...skills needed to provide support, as well as the specialist security expertise, which is vital for a company doing business online – it all sounds a bit daunting for a small business. Not to mention the internet is 24/7 so your website needs to be as well.
Entrusting your website hosting to a hosting provider removes the enormous burden of having to worry about whether your website is online and that it is secure. However if you decide to go down the hosting route, you must select a partner who can deliver, especially important in recessionary times. Your hosting provider will take the risk of the upfront capital outlay of the servers and security devices such as firewalls, therefore you need to ensure the provider themselves has enough cash to do this on your behalf. You certainly do not want to choose a provider who is struggling themselves as if they do go under, what happens to your website then? Will it go down with them?
As a small business you need to be confident that your hosting provider is credible, has experience and is financially stable. They need to guarantee 100 per cent network uptime for your website and deliver 24/7 support to get your site back up and running as soon as possible if hardware fails. Of course they must also have the knowledge to help and advise you on how to develop your solution as, hopefully your business grows. This means they are truly your partner and a resource you can use, to enable you to focus on your core business – keeping existing customers and generating new ones.
Do not forget to share this article with your friends, customers, suppliers and of course, members of your team (all the company) where necessary.
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Note: About the Author Colin Thompson
Colin is a former successful Managing Director of Transactional/Print Manufacturing Plants, Print Management/Workflow Solutions companies and other organisations, former Group Chairman of the Academy for Chief Executives and Non-Executive Director, helping companies raise their `bottom-line` and `increase cash flow`. Plus, helping individuals to be successful in business and life in general. Author of several publications, research reports, guides, business and educational models on CD-ROM's/Software and over 400 articles published on business and educational subjects worldwide. International Speaker and Visiting University Professor.
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Tips For Survival In An Economic Downturn