Believe it or not it is time for Part Three on Navigating the Current Economy. If you are new to my "Blue Blog" you may want to scroll down the blog page and review parts one and two of the series on Navigating the Current Economy.

In part one we discussed the dangers associated with the common tendency of over reacting to the current economy. In part two we reviewed the second emotion based component tied to the current economy - “Inaction & Business Paralysis”. In part three of this ongoing series I will introduce and discuss positive steps that can help you determine if your business is sliding backwards, or if it is already in free fall. I discuss some time proven steps for not only analyzing the problem, but also how to stop the fall and return the business to a stable position.

Now that I have set the stage, let's begin.

Regardless of whether or not you feel that your business has been impacted by the current economy the steps I am about to introduce and discuss could be considered prudent business insurance against the ravages of the current economy. If you know for a fact that you have been impacted by the current economy and are sliding backwards, or you are in free fall, this information is most definitely for you.

What will I do?

Step One - Determine Your Current Position

Step Two - Evaluate Each Department & Function of Your Business

Step Three - Go Back to the Basics

Step Four - Emphasize the Fundamental Elements of Each Department or Function

Step Five - Develop Strategies that Bolster Weaknesses & Accentuate Strengths

Let's spend some time taking a look at each one of these steps.

Assessing Your Current Position

• Know where you are today in order to navigate into the future
• Act versus react
  • Information is power; look to the primary business indicators
  • Review and analyze the performance of major business function or department within the company
    • Marketing and sales
    • Manufacturing and distribution
    • Operations
    • Administration and human resources
    • Accounting and finance

Concepts for Assessing Your Current Position

• You may not know, what you may not know! It is often the unknown that poses the greatest problem in business.
• Decisions need to be based on facts, not gut instincts or hunches.
• Get feedback and input from qualified professionals, not your friends, family and associates.
• Consider the impact of your decisions before making them.
• When you act, act decisively.
• Put away the hatchet and use the scalpel when making cuts in the business.

Tools for Assessing Your Current Position

• Management and financial information systems

  • Sales forecast
  • Job costing
  • Budget & forecasting
  • Trend analysis
  • Cash flow analysis
  • Cash flow projections
  • Cash management system

Assessing Your Current Position - Red Flags that Signal Business Problems

• Red flags that signal impending business problems
  • Sales are sluggish and declining.
  • Gross profits are down.
  • Costs of goods sold (COGS) is increasing.
  • Management time is increasingly being used to resolve problems with impatient vendors; accordingly, efforts at maintaining sales volume are being diluted.
  • Accounts payable as a percent of COGS have increased, indicating that the business is leaning on its vendors and suppliers.
  • The credit and collection function has been ignored resulting in a sharp rise in write-offs.
  • §Sales forecasting has been continually optimistic, while actual sales and backlog indicate quite a different picture. If this is the case it is time to reevaluate the way potential sales are rated and projected.

•  Danger signs that signal impending business problems 
  • §Supplier demands for C.O.D. payments are sidestepped, and searches for new vendors are initiated.
  •  Accounts receivables have become progressively stretched, leading to the temptation to pre-bill.
  • The customer base has become too concentrated, leaving the business vulnerable to the loss of a major account.
  • Net working capital has actually turned negative which means a "cash flow crisis" is imminent.
  • Employee morale is declining