Thriving When the Economy is Not

 

thrivingIn 2008, Americans experienced possibly the largest loss of wealth in our country’s history. Writing this in mid-December, investments in the stock market have lost approximately 40% of their value, corporations have announced plans for cutting at least 100,000 jobs, GM and Chrysler are close to bankruptcy, consumers have cut back on discretionary spending and small business owners are facing some tough times. In addition, according to Credit Suisse, 6,150 name brand retail stores closed, representing 102 million square feet of retail space. As an owner, now is the time to create effective plans to thrive in this new economy.  I am deliberately using the word effective vs. efficient. My mentor gave an excellent explanation regarding the difference between the two words.  Two logging crews were to harvest all the trees on two different sections of property. (A section is 640 acres or one square mile.) The first crew moved in their equipment and started in. The weather was great; none of their equipment broke down and by working 12-hour days, completed their section in four days. The second crew had a similar experience, but worked 10-hour days and finished on Saturday. The last trucks were headed to the sawmill on Monday when the property owner met with the two logging company owners at the coffee shop. George, the owner of the first company was bragging to everyone while Sam sat quietly drinking his coffee. Mr. Jones sat down, listened for a while and then said “George, we need to talk. I giving Sam here a $10,000 bonus and it is coming out of your check.” George exploded and demanded to know what was going on. Mr. Jones chuckled and said, “George, you and your crew are the most efficient team I have ever worked with. However, you worked on Mrs. Potts property last week. My property is on the other side of the road.”  The moral of the story is that we must plan on being effective first and then develop the details to become efficient.  Did you know that UPS maps out every drivers route to insure left turns are kept to an absolute minimum? Did you know that the conveyor belts at Wal-Mart’s distribution centers are loaded with less than ½ inch of space between each box? One small business in Brooklyn has installed GPS devices in their 165-flatbed fleet. Not only did it prevent drivers from getting lost, but it also eliminated side trips for personal business, visits home or to girlfriends. The devices monitor trucks sitting idle, which is illegal in some localities and wastes fuel. The company estimates the system cut fleet operating expenses by 10%.  A Connecticut bank with nine branches cut 10%, or $40,000, from their annual office supply and printing expenses just by consolidating and standardizing purchases, increasing the order quantity of printed materials. A mortgage broker was facing monthly office rent of $10,500, with a 75% drop in transactions and a 66% drop in staff. The owner signed up with a virtual office provider who supplies a receptionist, a corporate mailing address, email and fax services and even conference rooms for client meetings. The staff now work from home, earn an extra 5% commission to cover expenses and reduced monthly overhead expenses to $1,500 – $2,500.  To survive and thrive in 2009 examine all expenses and monitor your inventory. Between insurance, property taxes, obsolescence and overhead, a good heuristic, (rule of thumb), is to price inventory holding costs at 25% per year. Every dollar saved flows straight to your bottom line or allows you to offer incentives to keep your top performers.

Advertisements

One thought on “Thriving When the Economy is Not

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s