Surviving 2009 – Are you ready?

With 2009 shaping up to be the most challenging year since the financial sector meltdown, what should be the advice given to businesses to enable them to survive this year?  The suggestions that follow should be observed at all times but especially when times are tough.

Firstly, a company must prepare a realistic budget for the year.  Too often companies simply take the previous year’s numbers and increase them by a set percentage to obtain the current year’s numbers.  A budget should reflect a reasonable expectation of what is to happen during the year.  It is no good projecting for revenues to increase if there is not a reasonable means of achieving it.  Forecasting a drop in revenues is not an admission of failure but may simply be the reality that the company is facing.

Secondly, the company should review its product lines to determine the viability of each line.  Some products do not sell well in tough times, for example automobiles or equity based investments, and it may be prudent to reduce or even temporarily discontinue the sale of these items.  The idea is that the company should focus its efforts on its most profitable lines.  However one must also consider that you don’t want to lose long term customers in the process so one must weigh the balance very carefully.

Cost efficiency is another important aspect to surviving the crisis.  Many companies think that cost efficiency is simply reducing costs by whatever means necessary including redundancies or eliminating certain expenses.  However cost efficiency is about finding the cheapest and most effective way of doing business but without compromising on the quality of the service or product provided.  The cheapest way to do something is often not the best way to conduct business.  Often companies will cut staff to save money, however reducing staff and expecting them to work 12 hours a day may seem like a good idea in the short run but will lead to bigger problems in the long run, e.g. resignations, increase in sick hours, reduced work productivity, etc.

These are just a few of the critical things to be considered by businesses in order to survive 2009.

Feedback question:  Do you think that companies do a good job of planning for bad times?