YOUR CASH RESERVES ARE VITAL DURING THIS ECONOMIC DOWNTURN
Wall Street is in the midst of a Category 5 financial hurricane, and it’s time to hunker down. The storm’s damage is already in the trillions, and the impact has sent a shock wave throughout the world. Be forewarned: this tempest may soon come barreling down your street, heading straight for your business. It is time to act now if you do not want to see your business blown apart.
The truth is that most custom residential AV companies are run by great integrators who work hard every day. Many of these businesses, however, are not built on strong financial foundations and, like trailer homes, they can be battered and destroyed by the current economic crisis. There will be a shakeout and when the market recovers, the stronger and better run companies will be the survivors. It’s time to hunker down and take emergency measures to help your company ride this downturn out. Here are some specific action steps that you can take to maximize your cash reserves and keep your company alive. Be ruthless in applying them.
1. Freeze all discretionary spending. Do not spend any money on non-essentials. Cancel all possible expenditures that you can survive without. Schedule employees for 40 hours a week only and prohibit overtime hours.
2. Focus on new sales. Ramp up your sales efforts, focusing especially on jobs that you can close in the short term. Sales provide the lifeblood of your cash flow that is critical during the storm. Provide all assistance possible to your sales team, including assigning employees from other departments to help them or canvass for leads. New sales are your best means of making it through the storm. Empower sales to give special discounts to clients who can pay now during the immediate crunch.
3. Look carefully at your jobs and receivables. Locate the most important bills that you can generate and collect now. Complete any jobs or phases of work that can be billed right away. If you have customers behind in paying, be very direct in contacting them and workwith them to bring in their payments as soon as possible.
4.Take inventory of all in-stock products and return everything that is not essential. Clean it all out. Your suppliers may not be thrilled with returns, but they will like it better than not being paid. Order only customer equipment that can be billed and installed right away.
5.If your workload slows down and you must lay off employees, do it in a kind and sensitive way. Consider going to four days a week for techs before laying them off. Be realistic with them about whether you feel you can reinstate them in the future.
6. Work with your suppliers, credit cards and bank to keep your credit lines open. Prioritize which bills and suppliers must be paid to keep your business working. If you must fall behind with some vendors, pick those who are not essentialto your business. During the storm, pull your maximum line of credit and do not pay ahead for discounts. Keep as much cash and credit as possible within your business. Pay only the bare minimum amounts required to keep your orders flowing. Whenever possible, pay with credit cards instead of checks to give yourself extra time.
7.Work very closely with your bookkeeper and keep a close eye on your business financials. These are your vital signs, and you need to check them at least once a week.
8.Your equipment suppliers will be under pressure too, and the last thing they want is for your business to fail. Don’t burn them; they can be your ally during the storm and may allow you special extensionsor terms if you work closely and honestly with them.
Rich Riehl (firstname.lastname@example.org) is a Los Angeles-based consultant to the CI business and creator of BidMagic.
The barrier to entry into the AV integration business always has been pretty low. Running a successful long-term business in these trying times is definitely going to be much harder. If you just jumped on the bandwagon to sell cool gear and make big bucks, then this may be a wakeup call to you that this is not the industry for your future.
If you are a dedicated professional and have skills, training and commitment to this industry, I believe that you will land on your feet. If this is your passion and vision, I’m sure that you will weather this storm and gain wisdom in the process. In any case, we will all be happier when the new day dawns. Best of luck to you.