Surviving Tough Times SCORE Grand Strand Chapter Silicon Valley Chapter Philadelphia Chapter Houston Chapter

The Environment Credit is tight Credit is tight Stock market has collapsed Stock market has collapsed Unemployment is rising Unemployment is rising Consumers are spending less Consumers are spending less A steady stream of bad news… 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 Fewer customers with less dollars to spend Greater competition for their dollars Greater competition for their dollars Rising debt; loans difficult to obtain Rising debt; loans difficult to obtain Business becomes unpredictable Business becomes unpredictable

Warning Signs –Can’t pay monthly bills –No profit at month end –No paycheck at month end –Inventory accumulating –Buying patterns changing Danger

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 Do worst case forecast for next 12 months; Focus on the next three to six months List steps required to stay solvent List steps required to stay solvent List actions to address 5 largest expenses 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 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 Get help from an objective 3rd party –Accountant, Lenders, SCORE

Stop the Bleeding Owners review all expenditures & sign all checks Owners review all expenditures & sign all checks Monitor all expenses closely Monitor all expenses closely Review cash flow for next 3-6 months Review cash flow for next 3-6 months Assign one employee to collect past due accounts; consider factoring Assign one employee to collect past due accounts; consider factoring Secure extended payment terms from suppliers; consider purchasing via company credit card Secure extended payment terms from suppliers; consider purchasing via company credit card Prune excess/obsolete inventory Prune excess/obsolete inventory Secure line of credit for unforeseen expenses Secure line of credit for unforeseen expenses Reduce employees hours Reduce employees hours

Increase Revenues Assess the marketplace for changes Assess the marketplace for changes Apply extra effort to see if what worked before is likely to work again; if not, adapt Apply extra effort to see if what worked before is likely to work again; if not, adapt Revisit old sales leads Revisit old sales leads Consider increasing your marketing budget and try new approaches Consider increasing your marketing budget and try new approaches Bundle products; provide special sales offerings or more attractive pricing Bundle products; provide special sales offerings or more attractive pricing Expand product line or geographic reach; buy out struggling competitors Expand product line or geographic reach; buy out struggling competitors

Downsize Downsize office; Reduce all office expenditures Downsize office; Reduce all office expenditures Reduce wages Reduce wages Reduce employees Reduce employees Eliminate slow moving inventory Eliminate slow moving inventory Review advertising and reduce if possible Review advertising and reduce if possible Get help from objective 3 rd party to determine if can survive the recession Get help from objective 3 rd party to determine if can survive the recession If you cannot maintain your debt levels, develop a restructuring plan 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 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 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 one year to pay off debts, you need a restructuring plan If you need more than one year, seek professional help If you need more than one year, seek professional help

A Settlement Proposal Needs: A hardship cover letter – summarizes the problem A hardship cover letter – summarizes the problem A payment plan proposal – offers alternative payment options A payment plan proposal – offers alternative payment options A business history profile – summarizes causes, extenuating circumstances and actions A business history profile – summarizes causes, extenuating circumstances and actions Source: Corporate Turnaround (

Be Strong Be mentally prepared to handle unexpected events Be mentally prepared to handle unexpected events Maintain good physical & mental health Maintain good physical & mental health Include the family Include the family Communicate, Communicate, Communicate Communicate, Communicate, Communicate People, including creditors, follow leaders not victims People, including creditors, follow leaders not victims

Summary Think strategically; act tactically Think strategically; act tactically –Focus on the next three to six months –Reduce Costs AND increase marketing focus Aggressively attack expenses Aggressively attack expenses –Focus on the five largest expense items Centralize control of expenditures Centralize control of expenditures Make time to increase marketing Make time to increase marketing Get help – See SCORE! Get help – See SCORE!

SCORE ® Counselors to America’s Small Business Service Corps of Retired Executives Come in for Free Counseling 8701 S. Gessner #