As we start to enter the later stages of 2013, it is very important to begin to lay out well thought out plans for 2014 and beyond. There are some areas that I feel are major priorities for every company. My thoughts and emphasis are based on my own experience for common sense, sound financial business principles, and a book that was written after the last financial crisis named Leadership in the Era of Economic Uncertainty by Ram Charan. Charan wrote his book during the last financial crisis, and the points he makes are still relevant and remain so every single day in my opinion. I highly recommend Charan’s book to help business owners be prepared. As you plan going forward, make each of the following areas a priority.
- Cash- Always, it is the most important asset for two reasons. It will help you survive economic downturns and enable you to take advantage of opportunities in economic downturns. Make sure to measure and manage cash efficiency continuously and forecast cash balances in advance. I think a worthy goal for the future is to achieve and sustain at least a cash balance of 3-6 months of business expenses and possibly more.
- Sales– Focus on areas that are areas of your expertise, areas where you can establish a clear competitive advantage. For those with sales people, Ram Charan says, “they need to be able to tell you how decision making is done in a customer’s shop, what a customer’s dominant psychology is-too optimistic, too pessimistic, cognizant of the reality of the economic situation-and how that psychology is manifesting itself in the customer’s decisions about its own forecasts for sales volume, product lines, advertising, promotion, and pricing (Charan, p.50).”
- Costs– Analyze fixed costs to determine if they are absolutely necessary to the current and future profitable sales growth of your company. Reducing non-essential fixed costs results in an immediate and future increase in cash.
- Capital Expenditures– Plan major capital expenditures carefully and postpone unless they are absolutely critical to the survivability of your company. Look for alternatives to major cash outlays and increases of debt. Of course, “projects that have high strategic importance cannot be delayed, and you must continue to make investments in critical technology (Charan, p.79).”
- People– Strive to build a team of self-starters who are placed in the right positions in your company, “people who will take the initiative and have the energy, knowledge, and skills to act without close supervision(Charan, p.102).”
*Charan, Ram (2009), Leadership in the Era of Economic Uncertainty