Times are good, aren’t they? Will they stay good forever? Of course not.
Back in the last downturn, what do you wish you had done to prepare for future tough years? The time to prepare for hard times is during good times. That’s now.
You don’t want to hunker down and miss out on opportunities now for fear of what may lie ahead. So how can you take advantage of profit and growth opportunities now while taking prudent steps for later safety?
- Control your costs. This is not sexy, but it’s the single most important step. And it’s the opposite of what many business owners do. When cash is rolling in, they go on a spending spree.
- Run a lean operation. Don’t get lax with routine expenditures. Weed out people who aren’t doing the job you need done. Stay on top of scheduling, and don’t have more on hand than you need for each part of the day or week.
- Hire top quality people; train them well. Build a growth team, and nurture their loyalty. A strong, loyal growth team will also be a “get through tough times” team.
- Build habits of productivity and profitability during good times, so they will carry over into tough times. Make sure your incentives require and reward productive, profitable operation.
- Raise your prices. Don’t lag behind your competition.
- Keep your customers happy and loyal by performing impeccably, and handling mistakes completely and openly.
- Make sure everything you sell is profitable. Make sure your systems can tell you what is most and least profitable. Weed out unprofitable products or services that drag down your margin.
- Build up business savings, made possible by raising prices, controlling costs and boosting profits.
- Stay on top of opportunities. Innovate in your products, services, marketing, and operations. Don’t get trapped behind the innovation curve by sticking with lower margin offerings.
- Seek counter-cyclical business niches. What do you sell that will stay strong through a downturn?
- Grow into profitable niches, so that you have a stronger basis for profitable operation during a downturn. Don’t be caught trying to sustain an unprofitable operation when a downturn hits.
Surprise! Your preparation for a down cycle looks very similar to growing during good times.
Want a set of questions to help you discover how to make these things happen in your business? Just ask me and I’ll email it to you.
Many businesses stay small because the owners are afraid to let their employees take over important tasks, for fear they’ll make a costly mistake. Let’s face it: the owner is a control freak!
Here’s a basic rule for growing your business:
The more you can let go, the more you can grow.
• If you’re stuck being a worker or an administrator, you can’t be a good manager.
• If you’re stuck being a day-to-day manager, you can’t be a good strategic executive.
You’ve got to bring in top-quality people to handle every one of these tasks you hold on to and need to hand off, or you’re stuck doing them yourself. That holds you back, and limits your growth and profitability.
Many owners have a very hard time seeing this. They can see getting a bookkeeper or admin assistant, or hiring more producers, but they hold back from hiring a director of operations or a director of marketing. This keeps them small, and consigns them to low profit and low wealth build up. Then they complain about how hard they work and how little they have to show for it.
Hire good people, show them how to do what you need done, give them goals and targets, then let them do the job you hired them for, give review and feedback as needed. If they don’t do it, let them go, but that means you didn’t do a good job of hiring them in the first place.
For you to have good people so that you can let go, that means you have to learn to select good people–or get help from somebody who can help you choose and bring on board good people.
CEOs of rapidly growing companies are leaders of a growth team.
Our business is growing. When should we move to a new facility? How to get financing?
Our business is growing steadily. When is it right to move into a new facility? How do we find funding?
We are getting close to capacity at the kitchen we rent but we are at a point where we (2 people) might not be able to meet the new volume without a new facility and more employees. The business isn’t grossing that much yet, but won’t unless we can increase output. Asked on MosaicHub by Eric Martin
How can you increase capacity without increasing overhead?
— Find an “as needed” contract kitchen for the time being. A restaurant I frequent is open for breakfast and lunch, and is going to rent out its kitchen in the evenings for people like you.
— Do a second shift. Hiring a “night crew” is a lot cheaper than opening a new facility. Utilize your existing facility and equipment to the max.
Raise your prices! If you have increasing volume and you’re not yet profitable, you’re not charging enough. Unless you can demonstrate profitable operation, you’ll never be able to raise growth capital.
Get more efficient, and thus boost your labor productivity. I have a bakery client who started tiny, and now she’s at $3 million. It has been very hard for her to make the production more efficient. “We’re an artisan bakery!” she proclaims. But now she’s getting productivity religion, and it’s going straight to the bottom line. And quality is not slipping; if anything, the greater consistency is increasing quality.
Schmooze your bankers. Everybody’s first suggestion for raising money is crowdfunding, but I doubt it could work for you. You want permanent capital–perhaps $50,000 or more. You can’t crowdfund that much. You’d spend a huge amount of time and effort, then probably not make it.
Focus on getting profitable by getting the most from your current facility, get help putting a plan together, impress your banker, and get a legitimate capital loan.