Here is an article from Rich D’Amaro, Chairman and CEO of Atlanta-based Tatum LLC, the nation’s largest executive service firm focused primarily on the Office of the CFO, has developed a list of six tips which should serve as a basic guide for financial executives in the coming months.
1. Identify and Maintain Your Strengths, and Your Best Customers
Identify the strengths that have enabled your success to date, and those that will be important in the future. Which capabilities and skills are most critical? What distinguishes your ability to serve customers effectively? Identify your highest-margin customers, and understand what you are “doing right” for them. Develop a game plan to protect and build on the strengths that have allowed you to be indispensable to these customers. Rather than cutting costs across the board, think about how you can shift resources to retain these high-margin customers, and attract more customers like them.
2. Capture Market Share: Consider Opportunistic Acquisitions
Recessions reshape industries faster than good times do, creating opportunities for those with the vision and ability to seize them quickly. Studies have shown that companies have twice the opportunity to change their relative position in an industry during a recession compared to growth times. Keep an eye on competitors, and stand ready to capture market share as other players allow cost cutting to damage their service and quality, or fail outright. Market valuations are still down for strong and weak companies alike, and companies with resources to acquire complementary rivals will earn higher returns than they can with internal, organic growth. Of course, acquire only companies that support your ability to be the best in the world at what you do, and work aggressively to capture synergies. New opportunities may also exist to gain new alliance partners, to move into adjacent markets, to adopt new pricing models, or to enter new channels. Some of these opportunities may be created by the failure of competitors, and some may be created by a new customer appetite for solutions that show measurable ROI or reduce risk.
3. Manage Liquidity As Closely As Profitability
Your company has been dealing not only with negative growth but also with liquidity constraints. During good times you may not have obtained sufficient lines of credit to sustain your company through economic adversity. Trying to maintain liquidity on a smaller revenue base can be crippling. Every balance sheet dollar has to be turned over faster to contribute to working capital. Maximize cash flow by matching inventories to sales and collecting from customers faster. Take advantage of increased supplier willingness to share risk and to provide favorable terms.
4. Keep Core Activities In-House, and Outsource Everything Else
Build and protect those “core” capabilities that differentiate you, while aggressively outsourcing anything non-core. Depending on your business, non-core activities may include IT maintenance, human resources administration, benefits and payroll, accounts receivable and payable, manufacturing, distribution or sales. You’ll get the benefit of service provider expertise and economies of scale, and will pay only for services you need. The biggest benefit of outsourcing, however, is that it shifts your focus, resources and capital toward serving your clients’ higher value needs and building your competitive advantage.
5. Create New Metrics and Manage by Them
Tight economics put a premium on your ability to understand and model the relationships between revenues, costs and margins. Think about metrics that focus on the building blocks of revenue and sustaining market share, including sales pipeline, customer satisfaction, pricing and market penetration. Metrics should look beyond core financials to provide management with insight into market dynamics such as market share trends. The good news is that the enhanced metrics you need during challenging times will help you manage more profitably and efficiently in good times as well.
6. Communicate and Reenergize!
A downturn is a scary time for all your constituencies. You now need to begin the process of re-energizing your employees and creating new trust among all your constituencies. Frequent and honest communication will go a long way toward maintaining a calm and motivated workforce. Create regularly scheduled forums to listen to concerns, and to update employees on the state of the company and on their roles in achieving new company objectives. Studies show that employees are motivated far more by a sense of shared purpose than by compensation. Create that shared purpose and reinforce it daily. Lead your company out of the recession with realistic confidence, candor and a renewed sense of direction.
About Tatum, LLC
Companies turn to Tatum when critical business challenges arise because we immediately deliver financial and technology operational expertise via solutions tailored to the Office of the CFO. We understand the urgency of NOW and we leverage nearly 1,000 executives and consulting professionals nationwide to accelerate results to create more valueâ„¢. For more information, visit http://www.tatumllc.com.
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