How to Dominate in a Recession

Customers

If you are a manufacturer, sort customers in descending order of your annual revenues and profits — also consider their potential. Get closer to the top customers and sell them more. Eliminate complexity added by bottom-dwelling customers; they cost more to keep than they yield in profits. There are some winners in the middle who need attention, and losers who need to go — now! Firing customers is always hard, but when the cost to serve them exceeds the profit they generate, money and time that could be used on better customers is wasted.

Products

Sort your products the same way, in descending order of annual revenue and profit. First, consider the items at the top. Where are they on the product lifecycle? New and still growing, or old and declining? Which have plateaued (neither growing nor declining)? Those will decline next. Now is the time to rejuvenate them or drop them. Reduce the complexity drain of old, tired products. Dump them and make room for new ones.

Expenses

Quit spending! Cut all but truly essential expenses, but don’t cut spending on new products and marketing; those are your future. Get rid of all the nice-but-not-necessary things — temps, contract services, memberships, dues, subscriptions, high-priced travel, conventions, parties, FedEx, premium flights, expensive limos, hotels, and meals out — at the company’s expense.

Cash Flow

Watch cash flow like a hawk. Make a spreadsheet (you should already have one) projecting cash flow more than 13 weeks out, in detail. Collect fast, pay slow; take only the big cash discounts. Use checkbook-style, open-to-spend processes, starting with how much you have and then deducting items as you spend. Stop spending before cash runs out.

Head Count

People are usually the largest cost (after purchased materials) in a business. People don’t just cost wages and benefits; they spend money and consume resources. Carefully evaluate your people. Sort them into four groups: A (Great), these are the keepers and tell them so; B (Good), others you want to keep and tell them, too; C (Fair), questionable; D (Weak), underperforming or unnecessary, and you should cut them now.

Find the ones in the “Fair” group who can grow into “Good,” and work with them. Dump those who can’t grow, or won’t grow, along with the “Weak” ones.

These groupings have nothing to do with organizational rank. A “Great” customer service rep might be far more valuable than a “Fair” senior executive. Weak or unnecessary people in high paying positions should be cut first.