Business Transition Consulting LLC

Owner-managed businesses are able to react quickly to economic downturns and find new opportunities when larger businesses can falter. Here is a survival checklist for a closely-held businesses and its owner-manager:

1. Review and revise the business plan. If you do not have a plan, create one. If you do have a plan, review it to see how things have changed for the long-term or strategic view and for the operational or execution portion of the plan. One of the very best planning activities is to ask: “Why didn’t things go as in the plan?”

2. Maintain a planning group for the business. Whether you call this group an advisory board, a power circle, or the happy hour bunch, this is a group of colleagues and advisors who can provide well-considered, written judgments for your review on the planning issues you need to decide.

3. Monitor and understand the market for your product or services. Communicate directly with clients or customers to understand their desires and needs. Monitor their satisfaction with your products or services. Develop resources to analyze the market and stay ahead of your customers to anticipate where their desires and needs may change, especially with respect to technological changes. Many times a downturn provides an opportunity to diversify.

4. Do not curtail marketing and business development activities. Business development and sales activities should be a constant whether business is good or bad. This activity is an important part of understanding the market and knowing when to make moves to diversify or serve new customer bases.

5. Think about incentive compensation. Reward employees who are productive or who find new sources of revenue by paying those employees a reasonable percentage of the additional funds realized by the business. Bonuses tend to be taken out of owner’s profit. True incentive payments should come from increased revenue generated by employee efficiency or productivity.

6. Manage cash flow. Your accounting should produce on an accurate and reliable basis the following: income statement (profit and loss) and balance sheet reports monthly, all payroll and related requirements (creating checks and filing compliance reports), billing and invoice functions with accounts payable and accounts receivable reporting on a daily basis, a cash flow report (containing bank balance, cash on hand or cash balance information, and a six-month cash projection) and other management reports such as inventory reports necessary for management purposes. Stay in touch with slow and late paying accounts. If you manage from a bank account balance especially in periods of economic decline, you will be constantly surprised and sort of cash.

7. Manage variable costs. Monitor variable costs through effective and accurate reporting. Employees should know that mistakes causing increased variable costs will be recognized. Provide incentives for employees who minimize variable costs.

8. As you manage, use milestones. Change is not instituted the way an on-off switch is toggled. The process of reaching a goal is accomplished through transition from one milestone to the next, a logical sequence of steps, each anticipated and monitored as part of progressing to the identified goal. When a milestone is missed, the plan needs to be reviewed and revised.