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Wednesday, 5 November 2008

The Downturn Scenario

Even if the dread R word is still technically in the future, nevertheless we need to be looking at every possible approach which will help us through the downturn.

So - ask youself a few questions such as:

What did you experience in the last downturn in your business? What was going on in the economy? How did it affect you? How did you handle it? In hindsight, what would you have done differently? My advice in a time of economic downturn is …”If your sales drop dramatically … up to 50% … you will need to focus on saving the company.”

What will you do if you start experiencing margin squeeze, as your long term customers begin looking for a lower price?

Project your revenues out 6 months. What do you see?

Cash (the MOST important factor bar none!) – how much will it take to get through a prolonged downturn of 18-36 months? What are your cash reserves now?

Consider your debt load and reduce it if at all possible. What will you do if interest rates double? What will you do if your bank calls in loans or is unwilling to loan more money? What needs to change in your banking relationship(s)?

What opportunities will be available in your industry as weaker players are eliminated? What niche services or products can you begin to develop now? How might you take advantage of the economic downturn:

1. As things go bad, can I increase market share, if so how?
2. What products or services can I acquire, expand or enhance that will improve margin?
3. Can acquisitions be made during a downturn at less than market value?
4. A downturn usually means more people are available, how can I improve my talent pool during this time?

For further information take a look at http://www.maa-uk.co.uk/
Email: ivan@maa-uk.co.uk

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