Recession Proof Home Business by nsz19135


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                                                   Recession Proof Your Business
                                                    Ronelle Ingram May 2008
 Living in Southern California, I am wondering when the price of gas and the value of my home will reach parity. Economic
 downturn, housing price collapse, inflation, oil company greed, wartime economy— call it what you want, the world‟s financial
 system is tightening. Creative business people can still make a profit and grow their business. The current world economy can be
 viewed as nothing more than a fiscal bump on your road to success.

 The past few years of wartime prosperity have shown that the free flow of money allows businesses to be a little more lenient on
 adhering to excellent business practices. Prompt collection of accounts payable may have become a little lax. New customers are
 extended instant credit. Delinquent accounts are allowed to stretch out from 60 to 90 days past due. Demo equipment has been
 allowed to stay a few extra weeks.

 Many small business owners have been working in an atmosphere of employees having a great deal of power. Low unemployment
 rates have resulted in excessive wages, job-hopping, additional soft benefits, and a general sense of the employee being in charge.
 There is no longer a feeding frenzy for employees. 2008 is the year of job cuts, not hiring bonuses. How can both the employer and
 employee gain from the swinging of the economic pendulum?

From A Business Point Of View
Watch your receivables; many of your customers are having “cash flow” problems. A 90 day past due account may file for
bankruptcy or close their doors before you are paid.

Always ask a past due customer if they will provide a credit card number to make their account current. Many customers will pay for
a past due service agreement or even purchase new equipment with their plastic. If your company does not accept credit cards, apply
to be a credit card merchant.

 Small entrepreneurial companies must show a monthly profit to stay in business. A company or individual that does not pay their
 bills is not a customer. They are a thief. Why are you doing business with a known bandit? Think twice about doing business with
 known criminals. Your employees will stop coming to work if you do not pay them. Treat your non-paying customers similarly.

 Many district attorney offices have programs that work directly with businesses that receive checks that “bounce.” The D.A.‟s
 office will contact the issuer of the bad check. Options for not prosecuting the offender are offered if full payment is made. An
 official notice and threat of prosecution sent directly from the Office of the District Attorney is a powerful force in attracting the
 attention of wayward non-payers.

 Appeal to the business sense of your slow paying customers. “Times are tight; payment is required upon receipt of invoice.” Refuse
 to provide service or to send product until payment is received. When service is requested, offer to have the technician pick up the
 past due check. Before dispatching the tech, require the customer to furnish the check number and amount. For the customers with a
 history of not having the check signed when the tech arrives, require the customer to fax or scan over a copy of the signed check.

 Keep accurate records of a customer‟s payment histories and follow-up calls made by your accounts receivable personnel. A clear
 picture of their payment history will appear. The customer who is a chronic slow payer is a drain on your company‟s resources. Be
 polite, but be firm.

 Take a second look at all those invoices that are under $50. National surveys repeatedly quote the cost (to your company) of
 processing a single invoice ranges from $30 to $70. You cannot afford to invoice a customer for a single $15 cartridge of ink.
 Consider an additional small order charge, or minimum order.

 Monthly invoicing of low-end maintenance agreements actually cost more money than you are making. A $300 per year service
 agreement billed monthly will require twelve individual invoices for $25 each. Using the low end of the survey‟s cost of $20 per

invoice, it will cost your dealership $240 (12 months, times $20) in overhead cost just to invoice and process these payments. That
leaves you with $60 to pay for an entire year of travel, parts and labor needed to maintain the equipment for one year. This does not
even cover the required level of profit that should be earned by each agreement.

Profitable service departments should strive for a profit margin of 40% to 50%. Using this logic, a reasonable acceptable profit on a
$300 service agreement should be $180. No service manager or company owner should agree to sell a service agreement that is
guaranteed to lose money over the course of the year.

This logic is often countered by company owners stating, “We have a full time bookkeeper who takes care of all this. She has plenty
of time to follow-up. Invoicing is done automatically by our computer system.”

Maybe your company would not need a full time bookkeeper if you were not sending out hundreds of $20 invoices. How many
phone calls, scans, faxes, and first class letters are required to receive payment? There are some businesses (people) that you cannot
afford to have as customers.

From The Employee Point Of View
Sanity should return to the employee side of your business. Current employees will think twice before leaving the security of their
known job for an unknown new employer. Wages being offered by employers looking for additional personnel are becoming a little
more realistic.

The need to train from within can be done with less fear that the newly certified employee will jump ship. Ongoing training makes
an employee more productive. A well-trained worker can accomplish their job with less stress.

Employer sponsored education can be your greatest fringe benefit. Employees who know ongoing training is part of company‟s
philosophy are more likely to be long-term employees. As part of your yearly budget, put together a line item for employee training.
Ask employees to suggest appropriate goals for needed training. Some of your current employees may be well suited to do much of
this advanced training. Set aside assigned times for ongoing peer-to-peer training. Those who train often learn more than those that
are being trained. During a business slowdown is the ideal time to step-up training. As we enter into summer, a traditionally slower
time for service, fill those labor hours with planned training.

Ideas For Business Owners
Many business owners realize the digital equipment and document management agreements have actually reduced the workload of
field technicians. “The digital equipment is working better. We have fewer service calls. Do I start firing employees?”

As long as the incoming revenue is there to support your current staff, „Don‟t throw the baby out with the bathwater.‟ Now is the
perfect time to take on a new product line or expand your servicing territory. The traditional copier dealer can consider expanding
into document and fleet management printers, fax, wide format, mailing equipment, color, shredders, network services, office
furniture, etc.

Offer “summertime specials” with reduced pricing for Preventive Maintenance servicing. Techs can hand out fliers to your existing
customers offering new products or services. Marketing stuffers, announcing new equipment and services, can be included with
each regularly sent invoice. Any time you fax or email a customer a document, send along an additional message offering a new
product or special pricing.

During the economy slow- down, responsible businesspeople must double their efforts to encourage their customers to increase the
business they do with them. Aggressive sales offerings can be made with no increase to your advertising budget.

Every one of your employees can do a little extra promotion of the products and services your company provides. You must be the
one to kick start a new program, contest, or incentive plan. Strive to involve every employee in keeping the momentum on an
upward trend.

The downward slump of the world economy does not mean your company must follow the losing track. In the worst of economic
times, some companies manage to rise above the competition. It will take additional planning and extra effort. Aim your
company‟s sights on the opportunities of the changing economy. Actively take advantage on these recessionary times.


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