Over the course of the next few weeks we’ll be fleshing out 6 questions that every business leader should be regularly asking himself or herself.
These questions will help you to confront the harsh realities that all businesses and their owners face, thereby allowing you to protect and grow your business more safely, efficiently and profitably.
1. Am I adjusting to the New Norm or am I being complacent with business as usual?
The New Norm, as you may have heard, is the result of the downturn in the economy in the last 3 years. Some pundits predict a flat economy for as much as 3-7 years as we absorb severe decline in real estate value, credit card debt, unemployment, high energy costs, foreclosures and more. As the leader of your company, it’s your job to adjust your business accordingly.
In order to avoid complacency and being lulled into a false sense of security, take concrete steps towards streamlining your business to operate most profitably. Consider fewer fixed assets and more variable ones. For instance, leased or rented assets, instead of purchased ones, can make your business more flexible. On the other hand, if you can take advantage of competitors’ mistakes by acquiring equipment or inventory for $.20 on the dollar or of the tremendous amount of excess rental, warehouse and manufacturing space all over the country, this might be a great opportunity to do so.
As you think about these issues, consider your business plan and model. Should it be updated based on the New Norm? The answer to this isn’t always “yes” but it does deserve consideration.
2. Am I leveraging my banking relationship to enhance my business’s future?
Know your banker, and be prepared to call on him during difficult times. Establish credit by borrowing and repaying loans consistently, even when you don’t need the money. This way, you’ll avoid having to establish a new banking relationship or credit when you really do need a loan. In addition, it reflects well on your character to establish this credit, inducing your banker to work with you.
Don’t borrow to supplement negative cash flow. Borrow to facilitate operational needs and to establish your credit. The money from a loan could help you take advantage of a great opportunity, like acquiring equipment at a low multiple, or taking advantage of and buying out a failing competitor.
Just make sure to leverage your banking relationship now for banking issues that occur in the future.
Next Wednesday we’ll talk about the next 2 Questions we should be asking ourselves in order to face the harsh realities of our business’s situation. I’d love it if you shared the kinds of questions you ask yourself about your business in the comments below. Read Part 3 HERE.