One Company's Plan to Weather the Recession
Writing about how to survive the recession, I recently elaborated on the importance of developing a “living” plan to handle these extraordinarily tough times. I have been advising my clients for a number of weeks to do this for various reasons. Most of the time I have advocated a tactical plan, meaning the plan would include very specific metrics to work on. Such metrics might include reducing concentration of credit to any one customer to X%, or managing accounts receivable to reduce the number of average days to get paid by a certain number.
Most businesses need to have a tactical plan with measurable metrics. They also need to start a cash flow forecasting program and make it one of the most important management documents to work with on a daily and weekly basis. Soon after writing about making a plan, I received a copy of a plan one of my customers put together. Sometimes it is nice to know that a client is actually following your advice!
Developing a strategic plan that's right for your business
In my client’s case, they decided that a strategic plan would be more valuable to them. In their case, I agree. They are a U.S. government subcontractor that has steady monthly revenues and long term contracts. By all measures they are a small business. Even though they are quite profitable and have had a 20 year history of performing flawlessly on the contracts they perform, access to capital to mobilize any new contracts is simply not available from their bank right now. They fully expect that the potential award of any further U.S. governmental contracts are going to involve much more stringent due diligence on the part of the contracting officer.
My client decided to have a meeting with all their employees and share their plan on the economy, as well as the strategic plan they put together. With their permission, I am posting their short one page strategic plan here. I have changed their name and any other identifying information about their business to protect their privacy.
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A sample company plan to deal with current economic times
- Company must protect its “nest egg” which is its income from U.S. government contracts.
- Since we have a very uncertain government at this time, we must prepare to do things a little differently.
- The actual flow of corporate income should be unencumbered; if banks from which it comes are not having difficulties or delays caused within a government agency.
- The Federal government should never have a problem in paying their obligations unless something that is unknown now may delay or impair that flow of money, which starts from the U.S. Treasury.
- To plan for the above, we must stay as liquid as possible.
- We are better off curtailing large expenditures at this time and accumulating bank balances to a figure that will allow us to operate, if our other regular cash flow is impeded, for a period of time.
- We do not want to slow our corporate activities but we must plan on a “rough ride” from the Federal government for the rest of this year and probably most of next.
- Since everything we do comes from some sort of Federal funding, we must take into consideration that this flow could be slowed on a temporary basis.
- Banking – is an important part of our company’s activities. We must do business with only those banks (or bank) that is tied to local/state liquidity and ownership. No business should be carried out with the large bank holding companies or only those that management has approved and reviewed each month.
- If we find that we can’t meet the overhead costs for the corporation then we will establish a priority for expenses and review it weekly.
- The conditions that dictated the above actions are temporary and could be changed and return to normal with short notice.
- We face uncertain times in the future and everyone must be prepared to be called on to function in a temporary priority manner.
- We should all practice as much patience as possible. We will continue to move forward.
- We expect that any problems we face will also be faced by our partners which could provide additional uncertainty.
- Final agreement for decisions relating to expenditures must be approved by either the president or vice president.
I urge every small business owner reading this blog to put together their own plan. It doesn’t have to be as long as this one, but it needs to outline either strategically or tactically how your business is going to operate until tough times are over.
