SUCCESS STRATEGIES

FOR GROWING SMART

COMPANIES

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CONTENTS

INTRODUCTION 3

WHAT A CLOSING MARKET MEANS FOR YOUR BUSINESS 4

DEFINING YOUR CORE COMPETENCIES 6

YOUR PEOPLE ARE YOUR BIGGEST ASSET 7

MARKETING STRATEGY DURING A CLOSING MARKET 8

WHAT’S YOUR BUSINESS CONTINUITY PLAN? 10

7 SECRET TIPS TO RECRUIT ON A TIGHT BUDGET 11

5 TIPS TO PROTECT YOUR CASH FLOW 12

STREAMLINING PROCESS TO IMPROVE PROFIT 13

EFFECTIVE STRATEGIES FOR CASHFLOW FORECASTING 15

LEADING YOUR COMPANY THROUGH LEAN TIMES 16

CHAPTER 2

CHAPTER 1

CHAPTER 3

CHAPTER 4

CHAPTER 5

CHAPTER 6

CHAPTER 7

CHAPTER 8

CHAPTER 9

CHAPTER 10

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“Recession” can seem like a dirty word around business owners, but it doesn’t have to be. In fact, a closing market can offer a business increased opportunities to grow their market share and solidify their reputation – but only if they are smart enough to

survive and thrive when things get tough.

Right now things in business are going pretty well. There is uncertainty in the medium and longer term as to what is going to happen in money markets, commodity markets, the Chinese/US or EU economies. There is a lot of technology disruption starting to show up on the fringes of even the least tech savvy industries. Change is coming and whether it is disruption, a softening economy, a total global meltdown or even a major political event we will all need to navigate it.

This book isn’t designed to give you a doom and gloom report on the current state of the economy, but to provide you with strategies to weather any storm (economic or otherwise). All these strategies are best-business practices – the things we know we should be doing anyway, but tend to let slip while things are going well. By addressing these strategies and pain points, we can create leaner, better businesses with the tools to survive any scenario.

The worst thing you can do is head into a difficult period without a plan. You are literally risking your most precious asset – your company – on the roll of the dice. Strategic planning and execution are crucial to guide your business through the ups and downs of a turbulent economy, and ensure you come out the other side as a strong market leader.

Planning for potential difficulty isn’t about pessimism or scare-mongering. It’s smart business.

INTRODUCTION

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“Worry is a wasted emotion,” Steve Hansen (All Black Coach).

WHAT A CLOSING MARKET MEANS FOR YOUR BUSINESS

CHAPTER 1

S ay the word “recession” around a business leader,

and watch their expression fall. The Global Financial

Crisis of 2008 left its stain on many companies, and

the ripples of a long-term recession environment continue

to be felt in many industries.

Interestingly, some commentators believe we aren’t out of

the woods yet. Economist Ben Cassalman writes about the

potential for a 2016 recession in FiveThirtyEight magazine

(Source), and the US consultancy High Frequency Economics

released a report detailing their belief that the world was still

living with the impact of the 2008 GFC (Source).

Planning for a closing market should be part of your

standard executive strategy. Why? Because all the

techniques and processes that keep your business afloat

during lean financial times are also good business practice.

If you employed the strategies we outline in this book

all year round, your business would be leaner and more

profitable than ever.

WHAT DO WE MEAN WHEN WE TALK ABOUT A CLOSING MARKET?

The NBER defines are recession as a “significant decline

in economic activity spread across the economy, lasting

more than a few months, normally visible in real GDP, real

income, employment, industrial production, and wholesale-

retail sales.” (Source).

As we’ve all learned firsthand from the GFC in 2008,

markets can swing from one extreme to another, and this

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can happen on a global, national, or local scale. A closing

market is a market that’s contracting, slowing down. This

could mean a global recession – like the one we saw in

2008 – or it could refer to a local market, such as a certain

geographic area, or a segment such as mining or dairy.

Whatever the situation, dealing with a closing market is a

common factor of being in business, and there are several

strategies you can employ to navigate it successfully.

SHOULD YOU BE WORRIED?

“Worry is a wasted emotion,” Steve Hansen (All Black Coach).

Worry without action rarely accomplishes anything. Instead

of worrying about the state of the world economy, focus on

what you can do to prepare your business and your team

for a potential downturn. Two key foundations that will drive

your results in a closing market are the strength of your

brand position in your market, and your financial position.

Why? As markets and customer/client needs change, a

business must pivot in order to remain competitive. By

changing consciously before you need to, you stay ahead

of the competition and retain your market edge –

a sustainable point of difference.

The best leaders and companies are already pivoting at a

time when they are performing well. They know through

experience that the good times won’t last. To stay ahead

of their competition and to navigate change they must

understand what success continues to look like. How do

they do this?

Focus on core competencies: Define what differentiates

you in your market, and focus on bringing that to the fore.

Get strategic: A strategic plan for your company is only

worthwhile if you’re regularly working on achieving it. Set

short, medium and long-term goals and 90-day action

steps to work toward these goals.

Forecast your profit and cashflow: It’s important to

strengthen your financial position. Prepare a 3-5 year

forecast. Have benchmarks in place so you can quickly see

if you’re hitting or missing. Update monthly so you have

visibility on how you’re tracking against your plan.

Don’t stop marketing: Too many businesses make the

mistake of cutting back on marketing during a downturn.

In fact, it’s the perfect time to step up your marketing game

and strengthen your market position. Work on spending

your marketing budget in smarter ways.

Look for opportunities: Don’t let the doom and gloom

in the media fool you, a recession can present unique

opportunities for a lean company who can react quickly to

market changes. Many companies experience significant

growth during a recession as they leverage gaps in the

market or slow-moving opposition.

Be optimistic: If a global recession hits again, and even if it

were worse than 2008 (or any of the other significant global

downturns of history), there’s no saying that it will impact

your business. By preparing how to handle a downturn,

you’ll be set to bounce back in record time.

Whether we’re staring down the barrel of a major financial

event, or simply conducting business as usual, any

company can benefit from improved processes, cashflow

management, executive strategy and superior leadership.

Let’s examine these areas in more depth.

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Don’t get distracted trying to diversify or chase trends:

focus on what your business does best and how

you can be a leader in your market.

During a period of market downturn or volatility, the advice

often heard is to diversify, to offer new products and

services in order to create new revenue streams to cushion

the impact of a slowdown in business.

This isn’t always the best method. Instead, you should focus

to your core competencies – the factors at the core of your

business model that differentiate you from the rest of the

market. A focused approach based on leveraging the talent,

quality, and market potential you already have will serve you

better than chasing trends or emerging markets.

IDENTIFYING YOUR CORE COMPETENCIES:

Core competencies are the things that make your company

unique – they are what enable you to provide

value to your clients and customers.

Your core competencies should fall into at least

one of these categories:

Quality: Your products outperform

others in the marketplace, and your

services are reliable and professional.

A business with a reputation for quality can

demand a higher price for their product, and

they often inspire fierce customer loyalty

– as their clients aren’t driven to them

by price-related factors.

CHAPTER 2

DEFINING YOUR CORE COMPETENCIES

Innovation: Do you offer a product or service that services

a need in a unique way? Innovation drives many markets, and

if your product is something cutting edge, then you already

have a competitive edge in the market.

Strategic Targeting: While many companies may offer a

product or service similar to yours, do you target a niche

market? Superior customer targeting can enable a company

to own a specific corner of the market.

Flexibility: Are you nimble? Does your strength lie in your

ability to react quickly to changing customer preferences and

opportunities? History is filled with examples of slow multi-

national companies pushed out of market share by smaller,

more nimble competitors.

Once you’ve identified your core competencies, it’s important

to ensure they remain at the heart of everything you do as a

company. Strategic planning for the year ahead should begin

with addressing the core competencies. They should then

factor into your short- and long-term goals.

Focus. Create sustainable competitive advantages through leveraging your core

competencies. They are at the heart of your value proposition

– and your future success.

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I n a crowded global market, your talent is your biggest

differentiator. People with the right skills, attitude and

drive to achieve are hard to come by, so when you find

them, it’s in your best interest to keep them close.

During the last two global recessions, 3M made it part of

their strategy to focus on improving operational efficiency, as

an alternative to cutting staff. They wanted to avoid layoffs in

order to retain talent. That strategy paid off, as they released

some of their most innovative products during recession

and were able to enter new markets. That’s the power of

keeping good people close.

A similar strategy has been employed successfully by several

New Zealand businesses. Both an interior design and a

clothing manufacturer business took a different tack from

staff cuts and offered the choice of individual redundancies

(deep cuts) or moving to a 4-day week until things improved.

In both businesses, the majority of employees opted for the

4-day week. The result of this was the retention of talent

and culture, which gave greater ability to regain momentum

quickly during the recovery. This also created a 20%

reduction in labour cost and an immediate 20% impact on

the bottom line.

Retaining quality staff isn’t just about monetary incentives,

although being able to offer a competitive salary and

benefits will definitely help. Your people want to feel valued,

they need a reason to get up in the morning and align to

your business’s core purpose. If you can’t give them that,

they will look for fulfillment elsewhere.

SO WHAT ARE SKILLED EMPLOYEES LOOKING FOR FROM THEIR JOB?

A high level of engagement: Staff stay at a workplace

when they feel as though they are contributing something

of value, and are valued in return.

CHAPTER 3

YOUR PEOPLE ARE YOUR BIGGEST ASSET

Collaborative environment: Contributing to a collective

knowledge base to achieve great things encourage your

team to bring their A game.

High performance culture: Acknowledging and rewarding

performance entices your people to continue to perform at

their best.

Options: The ability to pivot their career within your

company and grow into new and exciting roles.

Flexibility: Flexible work arrangements where employees

can work remotely, or start work at a different time improve

their quality of life.

Visibility: Too many employees have no idea how their

company performs in the market. Sharing the company’s

performance with your team gives them valuable insight

into where, and why, strategy focuses on particular areas.

Succession planning: Ensure you have a plan for the

future of the business. Employees like to stay somewhere

they know will provide some kind of security.

Robust conversation: Your employees should feel as

though their opinions and innovations are valued. Create a

culture where they feel free to suggest improvements and

have the opportunity to take ownership of their own ideas.

A fun place to work: Initiatives like providing fresh fruit for

staff, a social club, or friday night drinks can go a long way

to creating a healthy and happy company culture.

What are you staff looking for in order to remain with your

company? Why don’t you ask them. Perhaps they have

some ideas you haven’t thought of.

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W hen lean times hit, the natural reaction at most

companies is to pull back on marketing spend.

The governing board can see this as an easy

way to cut budgets.

However, it can be a huge mistake.

If anything, your marketing spend should increase during

a closing market. While other companies are cutting back,

you can reach into the market and become a dominant

force. The Management Review conducted a study of

business spending during the 1990-1991 recession, and

discovered that firms who raised marketing budgets were

twice as likely to pick up market share. (Source) Effectively,

top executives can cash in on the opportunity rival

companies are creating for them.

CHAPTER 4

MARKETING STRATEGY DURING A CLOSING MARKET

“The first rule if you are cutting back, is to cut to a strategy.” – Michael Porter.

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Adjust product portfolios: Re-forecast demand for your

products or services based on new consumer behavior. You

may have to prune weaker items in some lines, or introduce

new products that focus on current needs.

Emphasize core values: Tie your marketing strategy to

your core competencies – the unique value that you bring

to the market. Build a loyal customer base who share

those values – use tools like NPS (Net Promoter Score) to

understand and grow loyalty.

Cut ineffective channels: Are you pouring money into

paid search for very little ROI? Are your above-the-fold

campaigns generating the performance you want? Look

at where you can reallocate marketing spend to more

effective channels.

Focus on Target Market: Understanding who your target

market is and focusing your business and marketing on

these people who are most profitable, most influential and

who have the most growth potential will help continue your

brand loyalty and growth.

That’s exactly what NZ company Parmco did during the

last recession. Parmco provides kitchen cooking,

dishwashers, waste, ventilation & kitchen essentials, and

they took a hit when the recession dramatically impacted

the housing market.

Parmco developed understanding of their business purpose,

which is about enhancing lifestyles, They refined and focused

on their target market – lifestyle driven women who love to

entertain. As a result, Parmco drop the trade-show circuit

for TV advertising on the cooking channel. The result was a

40% increase in revenue in 12 months - during a recession.

Today, this new target market continues to drive all their

marketing and product decisions.

These tactics aren’t just important during a closing market,

they’re part of a successful strategy for every healthy

business. Change now, before you’re forced to change. By

building a lean, smart marketing strategy now, you will grow

your resilience as a business.

This strategy worked for Johnson & Johnson. During the

GFC, Johnson & Johnson increased their advertising spend

and invested heavily into R&D, while other companies cut

back. This, coupled with other strategic decisions such

as maintaining cash reserves, saw Johnson & Johnson

successfully through the downturn with an increased

market share.

“The first rule if you are cutting back, is to cut to a strategy.”

– Michael Porter.

Strategy is about effective use of your resources, by making

clear choices about how you’ll compete in the marketplace,

and aligning these choices with your company goals.

Strategy is the key to putting those valuable marketing

dollars to the best possible use. Bear in mind how a closing

market may impact buyer behaviour, and adjust strategy

accordingly. Buyers often become value conscious, look for

durability over aesthetics, and change other behaviours in a

closing market. Stay on top of market research and look for

gaps and trends you can exploit.

Here are some other ways you can refine your marketing

strategy for a closing market:

Incentivise distributors: Use extended financing,

early-buy discounts, return policies and other methods to

encourage distributors to stock your products.

Change your mindset: Instead of seeing advertising as

a drain on profits, understand it is a means of achieving

objectives, a contributor to profits.

Build trust and loyalty: Consumers like the reassurance

of a known entity, and during uncertain times tend to flock

to brands they trust. Stay close to the customer/client and

understand what they value, expect, and want improved.

Build close, collaborative relationships through different

channels and tools (such as social media).

An effective way of building trust and owning the voice of

your customers is by seeking feedback through regular

customer surveys (A common tool for this is Net Promoter

Score, an extremely simple tool allowing you to benchmark

yourself against industry norms). You can then use this

feedback to continuously improve you business. Business

leaders should have the confidence to ask and the desire to

know what their customers think.

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emergency? Think about facilities for off-site work and

communication plans.

4. Protect your data: For many modern businesses,

data is at the core of what we do. How will you protect your

data from destruction, and access it should something

happen? A Disaster Recovery Plan differs from a continuity

plan in that it is focused around your IT management and

data storage.

5. Compile your plan: With your team, put together the

core of your plan, ensuring it focuses on prioritizing core

business functions, as well as the safety and wellbeing of

your staff.

6. Test your continuity plan: Now that you’ve

determined the vulnerable areas of your business and

how to manage them during a crisis, it’s time to put your

plan to the test. Use a structured walkthrough, where each

team member walks through their role in the plan and

identifies weaknesses.

Disaster Simulations can also be valuable, and many larger

operations perform these manually. An actual disaster

situation is simulated, and the team has to carry out the

continuity plan exactly as it is laid out. This can identify any

key critical improvements that need to be made.

You never know when disaster may strike. Without a

continuity plan, you may find your company takes a long

time to recover from unexpected setbacks. It’s easy to

say, “That won’t happen to us”, but a casual attitude

toward disaster recovery and business continuity could

very well seal your fate. A continuity plan isn’t a practice in

pessimism – it’s solid business sense.

“Expect the best, plan for the worst, and prepare to be

surprised.” – Denis Waitley.

The New Zealand business community is no stranger

to the forces of nature. The 2011 Christchurch

earthquake left hundreds of businesses without

vital services. Many premises were totalled, and stock,

equipments and important documents destroyed. In

some cases it was weeks before business owners were

even allowed back to their buildings to assess damage.

In the event of a disaster such as the Christchurch

earthquakes, how long could your company remain

operating? What procedures and strategies do you have

in place to ensure minimal disruption?

A business continuity plan seeks to provide a framework

for recovering data and keeping the core business

turning over during a disaster. A business continuity plan

focuses on maintaining business functions during a major

disruption. The scope of your business continuity plan

covers everything from IT infrastructure and operations,

to procedures, assets, human resources, and more.

6 STEPS TO CREATING YOUR BUSINESS CONTINUITY PLAN

1. Determine Vulnerable Areas: The first step in

effective continuity planning involves assessing each area

of your business and looking for your vulnerabilities should

disaster strike.

2. Identify critical functions: What departments and

functions are required to keep the core of your business

going? Identify these functions and determine an

acceptable level of downtime for each – this will help you to

assign priority to different tasks.

3. Think about your people: Too many continuity plans

ignore the people factor. What does your team need

in order to work? How can you contact them during an

CHAPTER 5

WHAT’S YOUR BUSINESS CONTINUITY PLAN?

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5. Asking your clients may be an unconventional method

for finding talent but it can sometimes pay to think

creatively. Considering your partners and clients know

your business they’re likely to have contacts that will fit

with your company.

6. Be “always on” - it pays to keep an eye out for hidden

potential wherever you go. Remember that many skills

can be taught on the job, but the right attitude is much

harder to find.

7. Last but not least, consider hiring interns. This can

be one of the most cost-effective ways to recruit

bright young talent into the company. There are lots

of students and recent graduates who may not have

much experience but are very willing to learn.

R ecruiting is not always a straightforward process

but having an idea about how much time you’re

willing to spend on the hiring process, and how

much you’re willing to fork out financially, is beneficial when

you have to make tough decisions.

PENNY PINCHING TIPS

1. Make use of your social media networks, as lots of

companies these days are finding the right talent

through LinkedIn, Facebook, Twitter and the like. Ask

your employees and friends to share the link and post

a job ad to your community.

2. Your other networks such as family, friends, business

partners and networking groups will also be key in

finding the right person, and will allow for a much faster

and efficient recruitment process.

3. One of the best and most cost-efficient methods is to

fill the spot via internal recruitment. Perhaps someone

would like the opportunity to climb the ladder, meaning

your job will be much easier.

4. Even if internal recruitment isn’t possible, spreading

the word via your employees is a good idea as chances

are that your employees know someone (or someone

in their networks does) that can fill the job. You can

offer an incentive to staff that actively recruit new

team members. Even if you’re on a budget, this is a

comparatively lesser cost than hiring a professional

recruiter. And the chances of finding someone who

will fit into the team personality-wise are greatly

increased, and you’ll mainly have to access their

skills and experience.

CHAPTER 6

7 SECRET TIPS TO RECRUIT ON A TIGHT BUDGET

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Cashflow is one of the biggest concerns for

executives. Without a tight grasp on cash flow,

even a potentially successful company can crumble.

Poor cash flow management is more widespread than

you’d expect – a recent U. S. Bank study revealed

82% of business failures resulted from poor cash flow

management (Source). Don’t let your business become

another statistic. Practice strong cash flow management

and protect your company from financial woe.

1. Retaining Enough Working Capital

Having available working capital is your firm’s best survival

tactic. With enough money in the bank to manage your

running costs, you’ll be nimble enough to survive the rigors

of market uncertainty. Figuring out the correct level of

working capital to have on hand is a complex process, and

should involve expert guidance from your accountant or

business advisor.

2. Focusing on Consolidation

Every company wants to grow, but growth during a

downturn can cause serious cash flow issues, dramatically

impacting your ability to keep a strong level of working

capital. Growth often requires a line of credit or overdraft –

risky strategies during a recession.

During a closing market, you want to be focused on paying

down debt, streamlining processes, and keeping a solid

cache of working capital.

3. Watertight Terms of Trade

Terms of trade dictate the terms under which you operate.

They clarify the rights and obligations of your company

and your clients, and protect both parties in the case of

disputes or misunderstandings. Terms of trade cover key

clauses such as pricing expectations and the credit terms

you extend to your customers and clients.

CHAPTER 7

5 TIPS TO PROTECT YOUR CASH FLOW

When terms of trade aren’t reviewed and updated

regularly, problems arise that can overflow across the

whole business. One common problem is using terms

of trade that don’t sync with the terms of trade of your

suppliers – this allows negative cash flow to pile up.

Terms of Trade should be frequently reviewed to ensure

they meet the changing needs of your company. Also,

changes to laws means terms of trade will have to be

updated to ensure they are legally binding.

4. Managing Debtors Days

This is the measure of how many days you wait to get

paid. The tighter you can manage your debtors days, the

less cash you’re required to invest in unpaid accounts

receivable. Companies use their debtors days calculation

as a measure of cash flow management.

Many factors will contribute to determining your debtors

days – including industry practices, accounts due to

suppliers, and staff available to chase accounts – but you

can also review terms or trade, institute early payment

discounts, and online invoicing to improve your debtors

days calculation.

5. Talk to Your Accountant

While cash flow planning is a vital part of your business

strategy, the nuts and bolts should be left in that hands of

a competent accountant. Find a firm that understands the

strategies and pressures of your particular market

and work on creating a partnership with your accountant –

make them as invested in your success as you are.

Understanding cash flow shouldn’t just be left to your

accountant – it should be a vital part of your ongoing

strategic plan. Are you managing your cash as well as you

could be?

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customised, cloud-based publishing software. This enabled

their team to work from anywhere, and all processed from

GPS mapping, inputting information, editing, proofing, and file

storage to be completed online. By creating a more effective

process, Spot X cut pre-production costs and time by 85%,

resulting in a more sustainable and profitable business.

The more time and cost you can carve from these

processes, the more time you give back to employees to

use on doing what they do best.

WHY IS IT IMPORTANT TO HAVE LEAN, EFFICIENT BUSINESS PROCESSES:

� Customer questions and complaints can be dealt with

in a timely and thorough manner.

� Work is completed once, and completed correctly.

� Costs are managed effectively.

� Bottlenecks are eliminated.

� Resources aren’t wasted, forgotten, or duplicated.

Every day, your staff use hundreds of difficult processes

in order to conduct the core business of your

company. This could include time-tracking, sending

estimates, storing lead information, or logging support tickets.

And while these processes are required to keep the company

functioning and the data stored in an appropriate way, they

are not in themselves income generating.

Since processes are simply “the way we do things”, they

often remain the same year after year, regardless of their

actual efficiency. In reality, processes can slow down

productivity and performance for no good reason apart

from, “that’s the way we’ve always done it.” Those 7 words

are some of the most dangerous words in business,

especially going into a closing market.

Spot X Publishing experienced this firsthand, when

distributor pre-orders for their NZ guidebooks dropped

by 80% during the last downturn. Realising they couldn’t

keep the status quo, the company invested $150,000 into

CHAPTER 8

STREAMLINING PROCESS TO IMPROVE PROFIT

“Those 7 words are some of the most dangerous words in business, especially going into a closing market.”

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Implement changes: Once you’ve identified areas

for improvement and found solutions, you need to

implement these changes. Encourage staff ownership

of new process adoption and ensure you provide

adequate training and assistance.

Review, revise and improve: Review your new processes

to ensure they are as effective as they could be. Gain

feedback from your team and clients about the new

processes, and make tweaks where required. Monitor

performance over the following months so you can quantify

the results of your process improvements.

This review process should not be a one-time thing.

Process reviews should be part of your strategic planning

and should be undertaken regularly to ensure continuous

improvements can be made. Many companies like to adopt

an improvement strategy such as Kaizen to monitor and

improve all aspects of business operation.

Effective processes are at the heart of any lean, smart

company. Process improvements don’t just make for

increased profits, but they also result in improved data

collection and reporting, improved customer satisfaction,

and happier, less-frustrated employees.

On the other hand, it’s vital to keep the need for process

balanced. Don’t become so over-systemised that you lose

flexibility, or become boxed-in by bureaucracy. You just

need to ensure consistency of delivery.

6 STEPS TO STREAMLINE BUSINESS PROCESSES

Map current processes: Before you make improvements,

you need to understand how your current processes

work. Sit down and plot out the processes across your

entire business.

Look for bottlenecks and pain points: Where are

customers finding the most frustration? Do bottlenecks

exist at key points? At each stage, talk to staff and

clients about the specific issues. A Root Cause Analysis

methodology (see ThinkReliability for more information)

will help you identify the core of these issues.

Gather feedback from staff: While you can take a

high-level look at business process, it’s your staff who

go through the minutiae every day. They can point out

problematic areas and process bottlenecks.

Look to technology: If it’s a process your business

uses frequently, we guarantee you can find a clever app

or tool to automate it for you. Cloud-based technology

offers businesses tremendous freedom from paper-heavy

systems and double-entry. Many applications are able to

integrate with each other, and open API enables you to

customise your own solutions – meaning you can move

data from your CRM to project management to processing

to accounting with the push of a button.

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EFFECTIVE BUDGETING

Cashflow forecasting informs your annual budget, which

as a document receives attention throughout the year as

a benchmarking document. You can use past budgets as a

guide when planning your current cash flow forecasts, and

you should be updating both your cash flow forecast and

budget monthly as new sales data becomes available.

ADDING VALUE

Cash Flow forecasts can help you see potential cash flow

gaps and fill them before they become an issue. Without a

forecast to provide a benchmark, many companies resort

to desperate tactics after spotting issues too late, such as

discounting their product in order to reinvigorate cash flow.

As a smart business, you don’t have to resort to

this. Instead, you can focus on your company’s core

competencies. If you align your strategic goals to the value

you provide in the marketplace, you don’t have to resort to

discounting in order to keep cash flow turning over.

Projecting your company’s income and expenditure

enables effective operational planning, and can be used as

the basis for a solid business plan.

I n recent years, many companies learned the hard way

the value of effective cash and liquidity management.

With banks increasingly leery of providing cash

cushions to companies for growth investing or to smooth

cash flow, it’s becoming imperative for the success of a

corporation to effectively manage their cashflow. However,

sometimes that is easier said than done.

Cashflow forecasting predicts your company’s ability

to generate the cash necessary to fund working capital

requirements. If done correctly, a cash flow forecast can

enable you to predict cash shortages and point to the need

for growth, downsizing, or consolidation.

Here are the important factors to consider when

conducting cash flow forecasting:

CASH FLOW PLANNING AND ASSUMPTIONS

Cash Flow forecasts operate based on a series of

assumptions. You base your company’s assumptions on

factors such as past performance, market factors, provision

for cost increases, sales growth estimates, etc.

There are several other factors that need to be considered

in your cashflow forecasts. These differ depending on your

industry and business type, but could include:

� Understanding the level of liquidity required.

� Impact of seasonality.

� Reducing the costs associated with retaining high levels

of liquidity.

� Best, worst, and average scenarios for for a cash-flow

based liquidity plan.

CHAPTER 9

EFFECTIVE STRATEGIES FOR CASHFLOW FORECASTING

“The first rule if you are cutting back, is to cut to a strategy.” – Michael Porter.

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CHAPTER 10

LEADING YOUR COMPANY THROUGH LEAN TIMES

W ith economic doom and gloom are all over the

media, it can be easy for the culture at your

company to suffer. Your team worry about

their jobs, their families, their longevity at the company.

They may see strategic planning and process reviews as

precursors of troubled times ahead, and this negativity can

ripple right through the core of your organisation.

As a leader, what can you do to improve the culture at your

company and inspire your team?

Focus on what you control. In a downturn or closing

market, it’s vital that you don’t derail your company’s focus

by falling prey to the doom and gloom spouted by media or

competitors. Markets swing both ways, and unless you’re

a global superpower you have very little control over that

macro movement. So focus on what you can control – put a

strategy in place to deal with less-than-ideal market factors,

and you’ll be prepared for any eventuality.

Have a backup plan: You may discover you’re surviving a

closing market or economic downturn without any undue

effects, but what if things take a turn for the worse? If you

had to cut costs by 10% immediately in order to save the

business, could you? It pays to create a backup plan in case

of a dire financial situation – hopefully you won’t have to

use it, but you’ll be grateful it’s there if you get desperate.

Keep your team informed: This is especially true when

global events are impacting your market and doom and

gloom is all over the news. Get your team together for

regular meetings to report upon the company’s progress

and any issues that are arising. Use these meetings to

empower your team to strive for new goals, to report

successes, and to emphasize the positive impact to sticking

to your core competencies. Involving your people in solving

your problems will lead to some innovative new ideas.

Make the tough decisions when needed: One of the

hardest things about being a leader is having to make

decisions that will disappoint or upset people. But your

job is to look out for the company first, and to ensure the

business can continue to thrive for years to come. When

faced with tough decisions, it’s best to sit down with a pen

and paper and write down the facts in black and white.

You may realise you have to restructure a team or

postpone a risky strategic move. Make decisions without

emotion, and then implement those decisions with all the

empathy you have.

Practice Optimism: Your team hear enough negative

stories and pessimistic predictions from their friends,

family, and media. Focus on emphasizing your market

strengths, core competencies, and executive strategy. It’s

OK to be scared sometimes, but you shouldn’t let that fear

creep over into your leadership. Make your team proud to

work at your company, and excited for the future.

“Keep your fears to yourself, but share your courage with others.” – Robert Louis Stevenson

As a leader, your entire organisation look to you to see

how to perceive what they read in the media. If you’re

scared, they’ll be afraid, too. But if you show them how your

company intends to weather any storm, ask for their input,

and ensure they feel valued, then you’re well on your way

to creating an exemplary company culture.

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A great leader inspires the team to take ownership for

their own role in the company’s success, and offers a plan

to take the company step-by-step toward achieving their

goals. A great leader practices optimism, while preparing

for any contingency, just in case.

Strategic planning and execution are crucial to guide your business through the ups and downs of a turbulent economy, and ensure you come out the other side as a strong market leader.

So, what’s your plan?

At the heart of any good business strategy – whether it’s

a continuity plan, a process review, or a recession-survival

tool – is a focus on great leadership. In order for a business

to thrive, it needs more than just a great product – great

businesses are built from clever, creative people delivering

core human needs. A leader’s role is to ensure that

business can continue to provide value for years to come.

A great leader doesn’t bury his or her heads in the sand

at the mere mention of the word “recession”. Instead, that

leader works to prepare a plan to manage any potential

issues and plug any leaks in the business, before it’s too late.

“The greatest leader is not necessarily the one who does the greatest things. He is the one that gets the people to do the greatest things.” – Ronald Reagan

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