Survive the Downturn - Recognise The Value Of Employees

Extract from ICAEW report: 8 Ways To Survive The Downturn

Find out how communicating with your employees and thinking about their skills and abilities can help your business survive the downturn.

It’s always difficult when there’s bad news, but there is never a more important time to communicate openly, honestly and regularly with your staff.

How you behave during the difficult times will affect your reputation as a responsible employer and be vital in attracting and retaining quality staff in the future.


Plan ahead

Have you identified your ‘bad weather’ spokespeople, those who have credibility and can be relied upon to deliver vital information to your key staff?

Have you set up effective channels of communication to inform staff and stakeholders quickly when you need to?

During the recession you may be facing redundancies or restructuring to make savings, but:

Have you also identified the key individuals who will be essential for the long-term success of your business?

What steps do you have in place to retain and develop this talent?


Look for guidance and advice

It has been estimated that two fifths of directors today will be facing recessionary pressures for the first time in their careers. They may need support as they face increased pressures internally and externally.

Consider looking for mentors or advisers inside or outside your company who can provide guidance and advice based on previous experience.


Think about your staff and their skills

It’s also important to look at your management team, and ask whether they have the right skills to manage the new problems you are facing.

Some firms made the mistake of cutting back on training in the early 1990s and found themselves short of good, qualified staff when the economic upturn came. ICAEW research has shown that those organisations which continue to train in challenging times are most likely to be the winners over the longer term.

Businesses should also review their reward structures to ensure they are still relevant in the changed environment, particularly share option schemes and sales targets.

What alternatives do you have to keep your loyal staff? For example, can you offer sabbaticals or secondments; should you move to a four-day week or ask staff to accept a pay decrease to avoid multiple redundancies?

Source ICAEW - full report can be downloaded by clicking here.

Survive the Downturn - Review Your Structure & Cost Base

Extract from ICAEW report: 8 Ways To Survive The Downturn

Find out how reviewing the structure of your business can help you survive the downturn and take advantage of the upturn when it comes.

Now is a good time to review the structure of your business critically. Do you have the right business model to see you through the recession and put you in the best possible position to take advantage of the upturn when it comes?

Current economic circumstances may present opportunities and allow you to make changes that were previously difficult or unpalatable. If you need to make savings, examine carefully how you can get the best value out of your business and enable your business to emerge leaner and fitter at the end of the recession.


Think long-term

Avoid making across-the-board or short-term cuts which may damage your business over the long term.

Focus on key areas and activities which are business critical for the future to ensure your business emerges in good shape from the recession. Are there activities you could stop? Is outsourcing, offshoring or relocation a possibility?


Consider spending cuts carefully

Consider carefully before cutting your spend in apparently ‘soft’ areas such as marketing, IT or corporate responsibility. Think about the value of expenditure not just its cost. For example, research shows that in a downturn the winners continue to invest in their brand and build their reputation and profile with their key stakeholders.

It has been well documented that ‘brands that increase advertising during a recession, when competitors are cutting back, can improve market share and return on investment at lower cost than during good economic times’*.

Consider carefully which products and markets are most valuable to you. How can you reach these markets most effectively? Focus your activities and marketing investment to protect your most valuable markets and customers for the long term.

*John Quelch, Harvard Business School

Source ICAEW - full report can be downloaded by clicking here.

Survive the Downturn - Secure Your Funding

Extract from ICAEW report: 8 Ways To Survive The Downturn

Find out how reviewing requirements and exploring new sources of funding can help your business survive the downturn.

As the future becomes more uncertain, it is difficult to predict sales, profits and cash flows.

There is greater risk and the banks are likely to take a cautious approach to renewing facilities.


Review your funding requirements

It is essential that you regularly review your funding requirements over the next 12 months and beyond.

If you have a term loan or overdraft, be aware of any covenants or other conditions and constantly monitor how close you are to breaching them.

Prepare thoroughly if a review is coming up of any of your financing facilities.


Have contingency plans in place

If limits might be threatened ’think the unthinkable‘ and have contingency plans in place, such as the sale of assets.

When re-negotiating overdraft and loan facilities, be aware that banks are taking different approaches to interest rates, fees and charges. You may also be asked to give a higher level of security or a personal guarantee.


Explore different sources of finance

Make sure that you fully consider all types and sources of finance such as asset finance and invoice factoring and discounting. You might need new sources of finance if negotiations with your current providers prove difficult.

It is worth investing time talking to people about new sources of finance. Are there any funds available from the Government or local agencies?

These are unprecedented times and some larger businesses are offering their suppliers finance to maintain an increased supply of goods, so it’s worth exploring all your options.

Source ICAEW - full report can be downloaded by clicking here.

Survive the Downturn - Think Cash

Extract from ICAEW report: 8 Ways To Survive The Downturn

Find out how managing cash flow and access to capital and funding can help you survive the downturn.

Managing cash flow and access to capital and funding are critical to all businesses – more so in difficult times.

It is important to keep updating your cash flow forecasts and examine your debt cycles, stock and overhead levels and working capital.


Be proactive

Be proactive in managing your cash. Put cash flow and financing on the agenda for every management meeting.

Consider what you can do to improve your sales in a declining market:

* Can you reduce your stock levels quickly to boost cash?
* How reliant are you on your major customers and suppliers?
* How robust are your credit control procedures?
* If you are ’cash rich‘ do you need to conserve this cash or could you use surplus cash for the longer term benefit of the business?


Minimise your tax liabilities

It’s more important than ever to minimise your tax liabilities where possible and ensure that you are paying the correct amount of tax. Make sure all capital allowances and expenses have been claimed. Are you taking maximum benefit for all losses?

If you have difficulties making your tax payments, talk to HMRC before they become due; it may be possible to agree repayment deals without suffering any surcharges for late payment.


Talk to your financiers

It is vital that you talk to your current financiers before you get into difficulties. If you delay telling your finance providers about changes in your circumstances, they will lose trust in your future forecasts.

Source ICAEW - full report can be downloaded by clicking here.