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As businesses deal with the realities of a national recession, Carroll County Chamber of Commerce members got some hands-on advice on how to make their way through the economic downtown.
Speaking Tuesday, Jan. 13, to the chamber membership meeting at General Butler State Resort Park, David Oetken of Louisville offered five steps to survive the recession.
As director of Greater Louisville Inc., that city’s Chamber of Commerce, Oetken said his job is to assist businesses with funding and running their operations.
Before reviewing his list of keys for surviving a recession, Oetken stressed the importance of putting the family first when facing tough times. He recommends open communication with a spouse or other family members to let them know what is really happening with the business.
If a family business is not performing well, he suggests setting a “drop dead” date at which point operations would close if a specific financial goal is not achieved.
Additionally, he noted that now is the time to remain confident and positive, because “people will follow you.”
If they believe the end is near, their focus will be to get a resume together and look for another job, he said.
Five survival tips
Work on your business. Working the business is the “most important thing” for survival.
To do this, first perform a “SWOT” analysis to determine the business’ strengths, weaknesses, opportunities and threats. From this, set measurable goals and develop a six-month written action plan for the business.
This plan must be put on paper, Oetken said, because it’s not good enough to just have it in your mind.
“Once it’s on paper, it just about automatically happens for you,” he said.
Know your numbers. Have accurate financial reports on the business, and perform important tasks such as reconciling your checkbook.
To determine how a business is performing, analyze it based on industry benchmarks.
“If my business is showing a profit of 5 percent on sales, I should be happy because I made a little bit of money,” he said. “But what if I looked and I new that industry-wide, people that owned businesses similar to mine were making 15 percent? Wouldn’t I want to try to figure out what that was?”
Also, information needs to be tracked weekly. If a business waits for monthly financial statements and something changes at the beginning of the month, it can be 45 days before it would come to light.
Forecast cash. This is the second most important of the five keys to surviving the recession, Oetken said.
“Cash is a fact, profits are an opinion,” he once was told.
First, call the bank to determine how much money is there, then subtract outstanding checks for total cash available.
Next, prepare a six-week cash forecast, along with developing a list of the expenses that will come during that time.
Additionally, Oetken said it’s important to have an emergency fund. If a problem arises, it can get you through a tough situation.
Slash expenses, negotiate terms. Attack variable costs and discretionary expenses. He suggested personally signing all checks, to know what is being spent.
Ask vendors for price breaks, refinance existing loans, negotiate better lease terms with the landford and always bid out insurance.
Sell harder. Double the amount of communication with customers, he said.
Businesses should not cut their marketing budgets during a recession. If anything, spending here should be increased; those who do this survive recessions in better shape than others.
And, “If the marketing works,” he said, “keep at it.”
Oetken also noted that businesses should discount, but instead add value to their goods and services.
He said discounting should be saved to move stale inventory.