Recession
Plans, Profits and Robbers
By Mark Lloydbottom - Lloydbottom Consulting
Sep 29, 2009 - 9:03:22 AM

Plans, Profits and Robbers

In February 1950 Frank MacNamara and his lunch colleagues decided to stop paying cash for their lunches at Major’s Cabin Grill, New York, and made the first charge to a credit card company they had formed – Diners Club. In 1966 credit cards were introduced into the UK when Barclaycard was launched. The seeds of the growth in unsecured lending were sown and some 38 years later in 2004 personal debt in the UK exceeded £1 trillion. Four years later this had increased by 40 percent to £1.4 trillion and households with unsecured debt had amassed on average more than £22,000.

It was during the last recession in 1990-1992 that CNN’s growing global news reporting came to the fore. Since then news coverage has grown exponentially. There is no escaping the fear that has so many in its grip. Many recessions have lasted less than a year, but the combined effects of rising household costs and the credit crunch coupled with the need to accommodate debt repayments indicate that this could be the ‘mother of all recessions’. Personal finances are also in trouble with savings rates lower and property values reduced, and some have the problem of negative equity. As the Andrea Gail set out on its fateful journey from Gloucester, Massachusetts in 1991 heading toward the Perfect Storm so we are in a storm whose causes have been swelling up for many years. There will be those businesses that do not survive the stormy waters ahead – what can you do to minimise the likelihood of being a casualty?

Charting Your Course

Many businesses operate without strategic operational plans – plans that include profit forecasts, cash flow, funding are essential for every business owner. But that plan is of little use unless it is shared within the organisation, and regularly monitored and adjusted as forecasts are superseded by actual figures. Who needs such plans? All business owners including those in business on their own with no employees. For those who won’t plan, is there an alternative? Yes - develop a KPI (Key Performance Indicators) plan. You can manage any business by monitoring just five numbers. The challenge is to work out which five. What are your business drivers? What is essential to the growth or survival of your business? What needs to change? Answer these questions and you will have part of the answer as to what to monitor. What must you do to drive the KPIs in whichever direction is necessary?

Improving Profit

In order to save, repay debt and manage a business that someone will want to buy profit is absolutely essential. The media announces daily that many businesses are cutting costs through redundancies or closures. Work with your internal consultants (staff) and ask them how you can increase sales, maintain or improve margins, increase cash flow and minimise overheads. In one meeting you could play the ‘profit robber game’. Profit robbers are costs or activities that begin with prefixes “mis”, “re” and “un”. As you look at your profit robbers ask what you can do to eliminate them. Examples include: mistake, misrepresent, missed, redo, revisit, unbilled, unnecessary. You may be surprised at how many profit robbers you will find – arrest them to improve efficiency and profitability.

The seeds of this recession were sown decades ago, everyone needs to adapt – we are unlikely to return to an economy where credit abounds so ‘freely’. How business is managed today - the decisions taken during the next twelve months - will determine what the business looks like on the other side of this recession.

www.marklloydbottom.com