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Taking Advantage of a Slowdown: Act Now
Good businesses take steps to protect their businesses, and then they use slower periods to make improvements that will help them recover faster.
I’ve been noticing something lately: the owners of all the good businesses—the businesses I know are going to sell—are busier than ever when business is slow. In talking to these people, I’ve learned that they act instead of waiting around to see what the economy does. They take steps to protect their businesses and then they use slower periods to make improvements that will help them recover faster. This month, I have some practical suggestions on how you too can use slower period to actually build a better business—a business that will be attractive to buyers when you’re ready to sell.
Look For Ways to Maximize Cash Flow
If you haven’t cut back on your staff and other expenses, your cash flow has probably taken a hit. Making cutbacks, especially staff cutbacks, is very hard to do. But doing it can make the difference between saving your business and losing everything. The longer you wait, the worse your situation will be.
If you have done the hard stuff and you’re still having cash flow problems, see if you can reduce inventory levels, stretch your payables, or collect your receivables faster. One of the companies I owned didn’t focus on collecting receivables; we got paid when we got paid, sometimes after 60 or 75 days. But if you have annual revenues of $3 million and you can collect your receivables in 30 days instead of 60, you’ll have an extra $300,000 in your offers immediately.
Brainstorm New Ideas
How can you get ready for the upswing? Make sure you’re getting the most out of your technology; that equipment you bought for one task during the boom might be able to do 10 other things your clients would pay for.
I sold a company that had the engineering and technology to provide a whole new product to the building industry but, during the boom, they were too busy to develop, refine, and market it. Now the new owners are perfecting the process, the product, and the marketing and getting ready for a new revenue stream.
You can also explore the possibility of marketing in other jurisdictions. One of my clients kept high inventory levels and had a reputation in his local area for always having the part. When companies in other jurisdictions started reducing inventory levels, he stepped in and let their customers know that if they needed a part, he probably had it in stock. Now he’s positioned to take a lot of those markets. That’s going to be a big draw when he goes to sell, and it will increase the selling price as well.
Get Creative Without Spending a Lot
If you’ve been reading my columns, you already know that preparing your business for sale takes time. Use this economic slow down to get your business ready to go when things pick up and you’ll be preparing for selling at the same time. Explore the following:
• Upgrade and optimize your website
• Cross-train your employees
• Develop policy, procedure and training manuals
• Give your premises a facelift
• Research the competition
• Ensure your accounting system gives you the information you need
• Interview and begin to build relationships with legal, tax, and business sale advisors
If you’re not sure what steps to take, call me at The Alberta Business Exchange today. I can help you identify priority areas for change that will improve your operation and position you for a timely, confidential, professional sale when you’re ready.
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