Recession-Proof (CONT’D FROM PAGE 16)
It helps build better relationships. “You get to know peo- ple a little bit better, and maybe you can work something out with them that strengthens your relationship going for- ward.” One proven tactic is to repackage goods and services into bundles more closely aligned with customer needs. “There are very few products and services that come as is, without being part of a bundle,” said Koenigsberg. “When we buy an airline ticket we get not just transportation but also food, baggage handling, and service on the plane and in the terminal.” Same goes for your products and ser- vices. Can longer lead times be exchanged for lower pric- es for customers in need of discounts? Or free delivery for long-term purchase agreements? Not all customers are created equal. Now is the time to assess the profitability of each. “Especially when heading into a recession, it’s important to rank your customers in terms of quality factors,” said Brownell. “We suggest mak- ing a list of customers in an Excel spreadsheet. Then start asking questions about each and rating them in columns." Brownell suggests asking questions like these: • Which tie up the least number of resources? • Which are willing to be flexible if, for example, supply chain disruptions mean they cant get what they need? • Which are the most loyal and pay on time? • Which are the most price sensitive? Rate each customer from one to 10 on each factor.
all too easy to let operations get a little bit flabby. Then, when the tide goes out, problems are exposed.” No matter what the current condition of a business, a sharp eye will likely spot one or two internal segments clouding the overall picture. While the knee-jerk reaction to this is to cut costs, that too often retards future profits. “When the economy turns down and companies lack suf- ficient cash, they all of a sudden are tempted to let go of core assets they really should hold onto for the long run,” said Basu. “The temptation is to cut too deeply.” A better course is to analyze the dynamics of any prob- lem segments, then make adjustments to enhance profit- ability. Only if they seem unsaveable should they be elim- inated. Collect Receivables Another important step is to raise operating revenue. “In a time of economic weakening, the key is cash,” said Basu. “Cash can get you through anything.” While there are many ways to raise cash, the balance sheet can offer some especially fertile ground. Acceler- ating the sale of stale inventory and extending accounts payable are proven tactics. Perhaps the most effective step is to accelerate the collection of accounts receivable, noted Harms. “Start calling folks who are past due." Reaching out to customers can bring a side benefit, noted Sam Brownell, founder of Stratus Wealth Advisors.
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March 13, 2023
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