Be More Profitable In An Hour – All You Need Is A Pencil!

How can this be you ask? In an hour and just with a pencil? The big boys do it, why can’t small business owners get this very simply concept? There are many ways to immediately cut massive costs in the light of declining sales revenues. Grab your pencil and start making some changes.

Citibank just announced their plan to reduce payroll by 52,000 people and close a number of offices. Many chains, Starbucks for example, are reviewing their operations and shutting unprofitable stores. Some manufacturers are trimming middle management positions, research and development and advertising budgets, and are recalling perks and benefits, company cars, and exchanging long-distance travel for teleconferences.

In a rapid and fiercely declining market situation, you must respond immediately by reducing overhead and then work to rebuild sales revenues. The point is to first put the business back into profitability by forcing a positive bottom line with massive cutbacks. Then, focus on rebuilding profitability in any way you can imagine. For example:

1. Concentrate on the most profitable items you sell, reducing the cost of production, acquisition, packaging, servicing and inventory of less profitable items by eliminating them.

2. Discover niche markets and exploit them as rapidly and thoroughly as possible.

3. Increase prices or reduce prices. Either can work.

4. Form a joint venture with compatible partners.

5. Change selling terms. Tighten them, reduce credit, force credit on purchasing terms.

6. Reduce payroll, immediately and drastically.

7. Stop paying and then renegotiate rent downwards.

8. Sell online.

9. Reconsider sales and marketing plans, sell on commission only basis.

10. Put everyone on an incentive plan.

Do whatever it takes to come out above break-even and then focus on profitable growth and development. It may be a massive downsizing and then a profitable ramp up as sales recover or as you discover new ways to be profitable. It probably should include a default on loans forcing a workout which will be beneficial to you and which frees cash to support the necessary transition from loss to profitability. Look to buy out a competitor on favorable terms which will self-liquidate the purchase out of additional sales the new business acquisition brings in while saving on overhead because of the merger.

If you cannot do this then you have only one other alternative path and that is to shut the operation down, liquidate the assets and workout the debt. Collect the receivables and sell all the inventory.

The lesson here? Action in the form of a rapid and daring response is required. Inaction is the killer. Small business owners get hung up on firing “family”, not paying the landlord, shutting down unprofitable activities… change in general. Profitability relies on change. The longer it takes, the more you lose. The sooner it’s done the more the likelihood of long-term survival increases.

Do something. Do it rapidly and then work on recovery. It’s all about change, the toughest challenge of all.