WE are all managing our businesses through times of unparalleled turbulence.
We’ve got bubbles bursting simultaneously in property, equities,
commodities, hedge funds and private equity.
Consumer confidence is plummeting, commodity prices are seesawing and it is
becoming apparent that the emerging economies will not save the developed
world. Meanwhile, businesses of all sizes are finding that price and value
are to the fore and competition is getting fiercer.
We are living in a very different world now and we all need a plan to see our
businesses through. Everyone running a company - small, medium or large –
should be asking themselves what they are going to do over the next 18
months to get through this economic tsunami.
- Put your business through a cash marathon: cash has always been king – now
it is more than king. If you have £1m in cash today it will buy you what £5m
would have done a year ago. I call it the power of five. If you have cash,
its power has gone up fivefold.
I’ve been putting my businesses through a cash marathon and I’ve been telling
other businesses over the past six or seven weeks to go away and do this.
They have been coming back to me and saying they found more cash in the
business than they thought they would. You may be amazed at the results if
you take these measures.
- Improve your productivity: finding productivity improvements is another way
to create and save cash. Real productivity improvement is about finding out
how to do more for less – not how to do more for the same.
Increasing scanning speeds at the tills in a shop is a good example. The job
gets done faster and you are creating more time for the person at the till
to get on with other things. That’s doing more for less.
Look at all the ways you and your staff spend their time and your money.
Finding one big way to improve productivity by 10% is rare, but you can do
that by looking round at a lot of small things. Ask your staff to suggest
ways to improve productivity.
- Bargain hard: recognise that the world has changed. Say to yourself I’m not
going to buy anything at the price I would have done a year ago. This is now
a buyer’s market – whatever you are buying. Most manufacturers are in a very
difficult position and time is on your side. Things will get cheaper. You
should be looking for 20% off everything.
Make harder bargains with yourself, too, by raising your hurdle rates. Set
yourself tougher targets when you invest in new equipment to shorten the
return on investment. Can you find ways to get your money back in four years
rather than five or six?
- Cut costs and waste: there’s a lot of waste in businesses, whether that’s
wasted time, money, effort or energy. A good example is inventory. Most
people keep too much of it. That’s cash you can free from your business.
Focus on cutting back your inventory and look at every product line. Get rid
of the ones that aren’t moving.
When times are good we all get fat and lazy. Have you looked at your energy
use? Look at how you are paying your suppliers. How fast are you paying
them? Can you improve the payment terms?
- Don’t fall prey to the dilution solution: if there are 10 things that make
your business work, don’t make the mistake of thinking you should trim back
slightly on all of them. Invest in the things that work and are productive
and get rid of the things that are not.
That can apply to your people, too. Don’t just cut back on everyone’s hours.
It’s harder for small firms to get rid of people because they are close to
them, but this is a time to be tough. If you employ 10 people they will not
all be equal. Sometimes you have to get rid of people to protect the
business and the remaining jobs it creates.
We are in uncharted waters, but people who take this opportunity to tighten up
their business will emerge from the down-turn with a competitive edge that
will serve them well in the future.
Allan Leighton, who is best known for transforming Asda from a £500m
company to one sold to Wal-Mart for £6.2 billion in 1999, sits on the board
of nine companies, including Royal Mail, Selfridges and BSkyB. He recently
published the bestselling business book On Leadership, and has appeared in
The Times Power 100.
As part of a personal pledge to raise £1m for Breast Cancer Care, Leighton
has invited Sir Stuart Rose (Marks & Spencer), Jacqueline Gold (Ann
Summers) and Val Gooding (Bupa) for an evening of conversation and debate.
The dinner event takes place at the London Intercontinental hotel, Park
Lane, on November 27.
The speakers will share their stories of the challenges, successes and
setbacks they’ve faced to get to where they are today. Single tickets cost
£250 and tables of 10 cost £2,250. For more information visit breastcancercare.org.uk/
onleadership, call 020 7960 3554 or e-mail specialevents@breastcancercare.org.uk
.
