Slowdown may hurt some businesses, but others will profit.Slowdown may hurt some businesses, but others will profit Let's face it. We are entering an economic slowdown. A clear signal that the economy is slowing comes from the composite leading indicator Leading Indicator A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators are used to predict changes in the economy, but are not always accurate. prepared by Statistics Canada. The indicator measures 10 major signs of economic activity each month. Earlier this year the indicator dropped .4 per cent - its largest drop since the major recession of 1981-1982. Another indication is the lack of confidence among Canadian consumers. Housing sales are slow and stores are reporting less business as people become more cautious about their spending. They are saving more money in apprehension The seizure and arrest of a person who is suspected of having committed a crime. A reasonable belief of the possibility of imminent injury or death at the hands of another that justifies a person acting in Self-Defense against the potential attack. of an economy about to embark on Verb 1. embark on - get off the ground; "Who started this company?"; "We embarked on an exciting enterprise"; "I start my day with a good breakfast"; "We began the new semester"; "The afternoon session begins at 4 PM"; "The blood shed started when the partisans a rocky road. Nobody appreciates a slowdown, but it does serve the useful purpose of forcing companies to get rid of excesses that inevitably build up during prosperous times. Experts say the 1981-1982 slump taught Canadian firms to compete. The main reason some enterprises handled the economic downswing down·swing n. 1. A swing downward, as of a golf club. 2. A decline, as of a business. Noun 1. downswing - a swing downward of a golf club better than others was that they planned and prepared for it. Now is the time for you to take steps to take action; to move in a matter. See also: Step to protect your business from a stagnating economy. Twelve suggestions follow. THINK STRATEGICALLY Few entrepreneurs are fortune tellers, but every business owner can plan how to respond to various economic scenarios. How would you handle the loss of a major customer? How would you deal with a cash-flow problem? What would you do if one of your key suppliers went bankrupt? You need contigency plans to deal with these and other possibilities. Establish a strategic plan that points out potential obstacles and lists various ways to work around them. BUDGET CASH It's wise to write down how much money you expect to come in and go out of your business over the next year. A month-by-month analysis will pinpoint seasonal fluctuations in market demand and potential cash-flow problems, as well as the best time of year to buy the new piece of equipment your company needs. REDUCE INVENTORY The companies that survive rough spells are the ones that stay lean and flexible. There may be several areas of your business that are not operating at maximum efficiency. Now is the time to get rid of any surplus, without compromising on the quality of your product or service. One of the first items you may want to cut back is inventory. The money tied up in excess inventory could be earning daily interest. There's also the risk of stored supplies becoming outdated out·dat·ed adj. Out-of-date; old-fashioned. outdated Adjective old-fashioned or obsolete Adj. 1. or damaged. Ideally, you should order supplies only as you need them. Work at achieving this goal by carefully planning production and supply requirements and by establishing a solid relationship with suppliers who can deliver the goods Verb 1. deliver the goods - attain success or reach a desired goal; "The enterprise succeeded"; "We succeeded in getting tickets to the show"; "she struggled to overcome her handicap and won" bring home the bacon, succeed, win, come through when you need them. LABOR NEEDS A big chunk of your controllable expenses probably goes toward labor. Streamlining your labor needs can save you money now and avoid the turmoil that a company faces if it's forced to lay off several employees at once. If you require extra help, consider hiring people on a temporary or contract basis. That way you'll pay for workers only when you need them. CONSIDER LEASING You may want to lease capital equipment instead of buying it. Leasing conserves your borrowing power and frees more of your money for other expenses. If you already own capital equipment, you may want to sell it to a company that will lease it back to you. Or you may want to sell equipment that's not being fully used. UNUSED SPACE The slower sales that usually accompany a period of stagnation Stagnation A period of little or no growth in the economy. Economic growth of less than 2-3% is considered stagnation. Sometimes used to describe low trading volume or inactive trading in securities. Notes: A good example of stagnation was the U.S. economy in the 1970s. may result in your needing less space to conduct your business. One way to generate additional income is to find a tenant for an unused area. STAFF IDEAS Your staff may have the best ideas for saving time and money during an economic slowdown. Encourage your employees to make recommendations. Reward suggestions appropriately and recognize all contributions. RECEIVABLES When the economy slows, many companies run into cash-flow problems and delay paying bills. The sooner you give your clients an invoice, the sooner they can pay it. So, be diligent dil·i·gent adj. Marked by persevering, painstaking effort. See Synonyms at busy. [Middle English, from Old French, from Latin d about keeping account receivables account receivable Any amount owed to a business as the result of a purchase of goods or services from it on a credit basis. Although the firm making the sale receives no written promise of payment, it enters the amount due as a current asset in its books. up to date. Issue invoices as soon as possible. Make credit terms Credit Terms The conditions under which credit will be extended to a customer. The components of credit terms are: cash discount, credit period, net period. clear to clients and follow up promptly on overdue OVERDUE. A bill, note, bond or other contract, for the payment of money at a particular day, when not paid upon the day, is overdue. 2. The indorsement of a note or bill overdue, is equivalent to drawing a new bill payable at sight. 2 Conn. 419; 18 Pick. accounts. NEGOTIATE PAYMENTS Try to keep your own cash flow as free as possible. Don't pay bills until 30 days, unless you are offered a discount for early payment. You many also consider volume buying if the discounted price makes such purchases worthwhile. Ask regular suppliers to give you extended payment terms. Consolidate your money and make daily bank deposits. You'll earn more interest, as well as the confidence of your banker. And you may be surprised by the amount of money sitting idle in the petty cash Petty Cash The small amount of cash and coins that an organization uses for minor purchases and providing change to customers. Notes: Petty cash is typically used by merchandising companies or small stores that are required to make change for customer purchases. box. INVESTIGATE FUNDING The hardest time to borrow money always seems to be when you need it most. Why not negotiate a line of credit now, so that you have some extra funding if you need it? Also consider where you would turn if a bank manager suddenly called in your loan. Other potential sources of funding may be your own savings, family loans, shareholders, government assistance or the Federal Business Development Bank (FBDB). STUDY THE MARKET Mass marketing is becoming a thing of the past. Companies that establish a niche and serve it well are beating the competition. More than ever, it's vital to know who your customers are, what they want in products and services and what they are willing and able to buy. You also want to know what your competition is doing. If you have never done a market analysis for your business, you have no time to waste. If you have completed one, it may be time to update it in light of the changing economy. NEW OPPORTUNITIES Niche marketing A niche market also known as a target market is a focused, targetable portion (subset) of a market sector. By definition, then, a business that focuses on a niche market is addressing a need for a product or service that is not being addressed by mainstream providers. doesn't mean you should put all your eggs in one basket. You actually may want to diversify diversify To acquire a variety of assets that do not tend to change in value at the same time. To diversify a securities portfolio is to purchase different types of securities in different companies in unrelated industries. now to ensure your business stays afloat even if one of your products or services is hit by a slowdown. Another way to diversify is through exports. The Canada-U.S. Free Trade Agreement has created many new opportunities just south of the border and the trend towards globalized markets is opening up the world to entrepreneurs. If the domestic market for your goods is slowing, find out where in the world your company's goods may be in great demand. If your company's products are very specialized spe·cial·ize v. spe·cial·ized, spe·cial·iz·ing, spe·cial·iz·es v.intr. 1. To pursue a special activity, occupation, or field of study. 2. , with a limited market, exporting is the way to achieve economies of scale. Remember also that an economic decline always brings new opportunities. During the 1981-1982 recession, many companies reduced the number of products they offered and the markets they served. Smart entrepreneurs picked up the slack 1. (operating system) slack - Internal fragmentation. Space allocated to a disk file but not actually used to store useful information. 2. (jargon) slack . They also took advantage of the increased demand for contract and freelance work freelance work free n → freiberufliche Arbeit f . This column was provided by the Federal Business Development Bank. The Federal Business Development Bank (FBDB) is a Crown corporation that promotes the creation and development of businesses in Canada. The FBDB pays particular attention to small- and medium-sized businesses. The bank provides term loans and loan guarantees, venture capital and a broad range of management training, counselling and planning services. FBDB clients employed 181,000 workers and created between 8,000 and 10,000 new jobs in the fiscal of 1989. Half of these new jobs were created in the non-metropolitan areas of the country. |
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