Since businesses in the US and for the most part the rest of the world cannot print money (unlike our government) when it comes to solving cash flow issues, company leadership have to look inward as to what they can do and make the hard decisions to adjust expenses down to meet lower revenue. In short, they cutback! The degree and duration of the cut depends upon the anticipated slump in incoming revenue and the reserves available to weather the storm.
Safe Harbor?
Banks are not a safe harbor for a company entering a deficit period – expenses exceeding revenue. Bankers do not look favorably on a company running up a line of credit when they have deficits as far as the eye can see. When they do not have a clear and immediate path to profitability and a pay back plan, even in the best of times, they would expect the company leadership to take the necessary and unpopular (some would call drastic) steps and implement an austerity program to remain financially viable.
What does a business do to survive?
The following lists examples of cost saving measures that a company may use to drastically cut cost, reduce the size of the business to survive. These measures are not listed in any specific order and there actual use may vary depending upon the specific circumstances a company might be faced with.
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Consequences?
Are these easy measures to take? No!
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Summary
Guiding a company through a major change in size through a tough economic time is a harrowing experience. There will be all kinds of naysayers to the measures that you have taken, but in the end having used the best minds in your organization, aggressively pursued and endured adopting the necessary measures, regularly communicated with all in the company – meeting many individually; the organization will survive. You will see who emerges as the true leaders in your organization and those who are truly committed to the success of the organization in the attitude that they apply to their jobs and how they influence others. No one wants to go through this experience but so many companies emerge stronger and more competitive than they were before!
Please share in the comment section below what measures you took that were successful guiding your company through an economic contraction.
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