Running a Business Through a Downturn

Week 1. Establish the actual position

Not a sense of it. The numbers.

Cash across every account today. Every committed payment for the next 90 days by date. Every receivable by customer with a realistic date.

Then the 13-week forecast, and the lowest point in it. That figure and its date are what you are managing.

Week 2. Decide the order of payments

Three things never move. Payroll, tax, anything personally guaranteed.

Everything else is a conversation, and the conversation goes better before a payment is missed than after.

Week 3. Cut deliberately, not evenly

Across-the-board cuts remove as much of what works as what does not.

Take your recurring payments, largest first. For each, ask what happens if it stops. Some answers are severe. Some are nothing.

The nothings are your savings, and they are usually larger than an even cut would find.

Then: protect the things that come back slowly

Some cuts reverse quickly. Marketing spend can restart in a week.

Some do not. Experienced staff, customer relationships and reputation take years to rebuild, and they are often cut first because they are the largest line.

Ask how long it takes to rebuild before you cut it. That question changes the order.

The pricing decision people get wrong

The instinct in a downturn is to discount.

Sometimes right. Often it starts a price war you cannot win and trains customers to wait for discounts, which persists after conditions improve.

Check your margin first. If the discount takes work below the cost of serving it, you are buying revenue that makes the cash position worse rather than better.

What to do with the time

Downturns free up capacity. Most businesses spend it worrying.

Two things worth doing with it.

Fix what you never had time for. Reconcile the books properly. Document processes. Renegotiate contracts.

Talk to customers who stopped buying. They tell you things nobody else will, and it is easier to ask when you are not chasing an order.

The opportunity nobody plans for

Downturns are when competitors fail, staff become available, and suppliers negotiate.

A business with cash and a clear position can act. One that does not know its own numbers cannot, because it does not know what it can afford.

That is the practical return on knowing your position, and it only exists if you established it in week 1.

What not to do

Do not stop producing management accounts. Businesses in difficulty often stop looking, exactly when looking matters most.

Do not delay tax to fund operations. It converts a commercial problem into a compliance problem.

Do not take money out for personal use while creditors are unpaid.

Where we fit

We build the forecast and the deliberate cut analysis. Send your management accounts and twelve months of payments.