Grow Your Business

As entrepreneurs, our main focus is running the business. We concentrate on getting the right suppliers, arranging enough financing for inventory, and marketing effectively to customers. We normally don’t have time to follow developments in the global financial markets because unless we invest regularly in them, they won’t affect us that much.

We have yet to see how serious this emerging global recession is going to affect us. But it is better to prepare ourselves to survive this crisis.

So, as an entrepreneur, what should you do?

1. Start analyzing the profile of your clients. How many of your clients are most likely to be affected by this crisis? Are they exporters? Do they invest heavily overseas? Are you familiar with the owners and their affiliations?

These are just some of the questions that you should ask yourself when you do a quick profiling. Of course, it is also important to avoid relying on just a few major customers or industries for your sales generation. To lower your risk, you need to consider diversifying and broadening your customer base.

2. To cushion the impact of lower sales, you need to protect your income by lowering your expenses. Review your expenses and try to see what items you can possibly cut down. Do you need to save on electricity and utilities? Are you paying your employees too much for overtime work? How much do you spend for office supplies every month?

You can do this by preparing a budget for the year that incorporates only the overhead costs that you find essential in running the business. Make sure the budget targets you set are realistic. To attain your goal, enforce corporate discipline when implementing the budget.

3. Remember that cash is king, especially in times of crisis. Build up your cash reserves and maintain a degree of liquidity equal to at least six months of overhead expenses. If your current cash balance is not sufficient to meet this requirement, you can work on this now by examining your sources of cash.

As much as possible, try to sell your products on cash basis. If this is not possible, shorten your cash collection period by limiting the credit terms you give to your customers and also the amount of receivables that you extend.

On the other hand, try to renegotiate your terms with your existing suppliers to possibly prolong your due date. The more cash you save, the higher your chances of surviving any financial drought.

4. Invest in training. When there is not so much activity in the business, you may want to take some courses to improve on a skill that you think is important to your business. For example, you may be good in sales and marketing but you lack skills in management accounting. You can take a short course or professional training program for this skill, or better yet, if you have the time, you can allocate part of your time to take an MBA (Master of Business Administration) program.

When you attend this kind of training, you will not only learn new things but also meet new friends and potential business partners. You will be a better entrepreneur after you have acquired the skills you need when the economy improves.

5. In every crisis, there is opportunity. As an entrepreneur, you cannot afford to whine and blame the economic environment for slowing down your sales. Be always be on the lookout for business opportunities and focus on growing your business. This is the best time for you to demonstrate your ability to innovate and become creative in surviving this crisis financially. Stay positive and you will continue to grow.

Henry Ong, CMA, RFP, is president and COO of Business Sense Inc., a . nancial advisory and consulting firm that helps small and medium businesses. Business Sense is affiliated with INPACT International Network of Certified Public Accountants. You may reach him at hong@businesssense. com.ph.

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