Document

Report
Surviving Tough Times
SCORE
Grand Strand Chapter
Silicon Valley Chapter
Philadelphia Chapter
Houston Chapter
The Environment

Credit is tight

Stock market has collapsed

Unemployment is rising

Consumers are spending less

A steady stream of bad news…
In the best of times,
40,000 businesses
fail each year
Impacts on Small Businesses

Fewer customers with less dollars to spend

Greater competition for their dollars

Rising debt; loans difficult to obtain

Business becomes unpredictable
Warning Signs
Danger
– Can’t pay monthly bills
– No profit at month end
– No paycheck at month end
– Inventory accumulating
– Buying patterns changing
What are the Options?
Reduce costs and Increase Revenues
Revenues
Expenses
First Steps

Do worst case forecast for next 12 months; Focus
on the next three to six months

List steps required to stay solvent

List actions to address 5 largest expenses
– Be severe, its much easier to cut hard once than multiple times
– Do not assume that sales growth will save you. It never does

Review your Business Plan
– Product mix, Location, Appearance, Pricing, Structure
– Identify why your customers like to do business with you and do more of
that
– Identify key personnel and make sure they stay happy

Get help from an objective 3rd party
– Accountant, Lenders, SCORE
Stop the Bleeding

Owners review all expenditures & sign all checks

Monitor all expenses closely

Review cash flow for next 3-6 months

Assign one employee to collect past due accounts;
consider factoring

Secure extended payment terms from suppliers;
consider purchasing via company credit card

Prune excess/obsolete inventory

Secure line of credit for unforeseen expenses

Reduce employees hours
Increase Revenues

Assess the marketplace for changes

Apply extra effort to see if what worked before
is likely to work again; if not, adapt

Revisit old sales leads

Consider increasing your marketing budget
and try new approaches

Bundle products; provide special sales
offerings or more attractive pricing

Expand product line or geographic reach; buy
out struggling competitors
Downsize

Downsize office; Reduce all office expenditures

Reduce wages

Reduce employees

Eliminate slow moving inventory

Review advertising and reduce if possible

Get help from objective 3rd party to determine if
can survive the recession

If you cannot maintain your debt levels,
develop a restructuring plan
Restructure Debt

If you can afford to pay off past due debts over
the next three months, you can handle the debt

If you need six months to pay off these debts,
you can probably negotiate with your creditors

If you need one year to pay off debts, you need
a restructuring plan

If you need more than one year, seek
professional help
A Settlement Proposal Needs:

A hardship cover letter – summarizes the problem

A payment plan proposal – offers alternative payment
options

A business history profile – summarizes causes,
extenuating circumstances and actions
Source: Corporate Turnaround (www.CompanyDebts.com)
Be Strong

Be mentally prepared to handle unexpected
events

Maintain good physical & mental health

Include the family

Communicate, Communicate, Communicate

People, including creditors, follow leaders
not victims
Summary

Think strategically; act tactically
– Focus on the next three to six months
– Reduce Costs AND increase marketing focus

Aggressively attack expenses
– Focus on the five largest expense items

Centralize control of expenditures

Make time to increase marketing

Get help – See SCORE!
SCORE
®
Counselors to America’s Small Business
Come in
for
Free Counseling
8701 S. Gessner #1200
www.scorehouston.org
713-773-6565

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