How to Survive & Thrive Steps to Succeed During Recession H & R Fabrics 1118 North 35th Ave. Phoenix, Arizona 85009 Tel. (602) 269-6131 www.handrfabrics.com February 19, 2009 16420 E. Bainbridge Ave. Fountain Hills, AZ 85268 Tel. (602) 908-1082 info@BlackerbyAssoc.com www.BlackerbyAssoc.com The guy who fell onto an upholstery machine was fully recovered. © 2009 Blackerby Associates, Inc. All Rights Reserved. Phillip Blackerby, M.P.Aff. Tel 602-908-1082 z Fax 480-837-6608 Phillip@BlackerbyAssoc.com www.BlackerbyAssoc.com twitter: @pblackerby www.linkedin.com/in/pblackerby Phillip Blackerby is an economist and consultant to small businesses. Specialty practice areas include: business planning; efficiency improvement using lean practices; public sector strategic planning and grant-writing. Mr. Blackerby has trained hundreds of managers in business planning, strategic planning and related topics, facilitated dozens of strategic planning processes and published several articles. He has negotiated banking relationships, managed an e-business, lobbied legislatures, analyzed financial markets and improved cost-accounting. Mr. Blackerby was Arizona’s lead project manager, and managed the Lean Enterprise and Professional Business Advisor product lines for the National Institute of Standards & Technology, Manufacturing Extension Partnership. He developed the FastTrac Manufacturing program, published four volumes of manufacturing improvement case studies and evaluated assessment systems and advanced technology grant applications. Mr. Blackerby is a member of the Arizona Technology Council, and serves as Vice-Chair of its Public Policy Committee. He is a certified FastTrac business plan instructor, executive coach and trainer (CCUI). He was Associate Deputy Treasurer of Texas, budget director for the Texas Comptroller and management auditor for the U.S. Government Accountability Office. Mr. Blackerby earned a master’s degree from The University of Texas at Austin, and a bachelor’s degree from Brown University, Providence. Recession Goals n Survive: CIK DROOM o Thrive: Position for ‘New Normal’ Invest in innovation Invest in reinvention Buy or bury competitors © 2009 Blackerby Associates, Inc. All Rights Reserved. -1- ‘New Normal’ z z z z z z z z High energy costs Declining to steady prices High unemployment Credit: moderate rates; high risk; tight: focus on assets, cash flow, FICO score Reluctant buyers, consumers Harsh business relations Real estate sector down All things ‘green’ up © 2009 Blackerby Associates, Inc. All Rights Reserved. -2- Tools: Balance Sheet As of: _/_/_ Assets + Cash + Accounts receivable + Other short term + Inventory + Plant & equipment + Other long term = Total Assets A = Liabilities + Accounts payable + Short term debts + Long term debts = Total Liabilities Equity + Investors’ capital + Retained earnings = Total Equity L+E = Liabilities + Equity © 2009 Blackerby Associates, Inc. All Rights Reserved. -3- Tools: P&L, Cash Flow Income Statement + = = Cash Flow Statement Gross Sales ± Sources and uses of cash due to operations ± Sources and uses of cash due to financing ± Sources and uses of cash due to investing + Beginning cash = Ending cash COGS/COSS Gross Profit Selling Expenses General Expenses Administrative Expenses Operating Profit (EBITDA) © 2009 Blackerby Associates, Inc. All Rights Reserved. From: _/_/_ To: _/_/_ -4- Balance Sheet - Survive Reduce Non-Cash Assets, Increase Cash z z z z z z z z z Collect collectable receivables Sell questionable receivables Require cash on delivery Require deposit on contract Sell & lease-back equipment Lease capital equipment Put off capital purchases Buy used equipment Rent-out excess facilities © 2009 Blackerby Associates, Inc. All Rights Reserved. -5- Balance Sheet - Survive Renegotiate Liabilities z Renegotiate rent: extend term? z Consider executive suite z Delay paying vendors until due date z Ask for discount: prompt payment; cash z Ask vendors to hold checks © 2009 Blackerby Associates, Inc. All Rights Reserved. -6- Balance Sheet - Thrive n Manage and o Minimize Inventory z z z z z z z z Money: 8-14% interest on capital Loss: lost; ‘shrinkage’ Material change: age; rust; temper Obsolescence: design; technology Quality: dirt; scrap; scratch; spoil Safety: tripping; injuries; lost time Space: $8-$20/sq.ft./yr. Transactions: in/out; rummage Inventory Adds Cost, Not Value • ‘Inventory is evil’ © 2009 Blackerby Associates, Inc. All Rights Reserved. -7- Income Statement - Survive Increase Revenues z More focused selling activities: sales calls, customer service calls, cross-selling z Government sales: 8(a), SBIR www.ccr.gov; www.sba.gov z Strategic partnerships: ‘What noncompetitor accesses the same market?’ z Adjust pricing to changing market z Diversify products, lines: go ‘Green;’ www.greenbiz.com z Reduce SKUs based on profitability © 2009 Blackerby Associates, Inc. All Rights Reserved. -8- Income Statement - Thrive Increase Effective Marketing z Web 2.0: Build trust; be expert eCommerce: Open markets Customer order entry Testimonials/complaints Optimize search Email list management Blog/podcast: Yours & others’ Social networks Twitter z PR: editorial content; create ‘hook’ z Signage: ‘A business with no sign…’ © 2009 Blackerby Associates, Inc. All Rights Reserved. -9- Income Statement - Thrive Increase Productivity: Cut COGS/COSS z Automate z Adopt new applications, some free www.google.com/intl/en/options www.jumpbox.com; www.download.com z Don’t fear the ‘cloud’ (SAAS) z Go paperless z Eliminate fax machine, phone, paper, toner www.efax.com z Shop credit card merchant services z Map, improve processes © 2009 Blackerby Associates, Inc. All Rights Reserved. - 10 - Income Statement - Thrive Increase Productivity Through Training z Free programs z Webinars z FastTrac® Program: Tempe, Gilbert www.blackerbyassoc.com/fasttrac z Arizona Job Training Program www.azcommerce.com/Workforce/JobTraining © 2009 Blackerby Associates, Inc. All Rights Reserved. - 11 - Income Statement - Thrive Increase Productivity: Map, Improve Processes z z z z z z z z MRP Map processes to see them Identify value-added, NVA Identify problem areas Innovate solutions Rank priorities Plan changes Make changes Start over © 2009 Blackerby Associates, Inc. All Rights Reserved. - 12 - Income Statement - Survive Decrease SG&A Expenses z Focus on core functions: operations, strategy, money, customer service, sales… z Outsource: accounting, bookkeeping, HR (PEO), legal, marketing, reception, selling… z Barter, negotiate professional fees z Drive 30% smarter: hi-MPG vehicle, weight speed, cruise, air filter, tire pressure… z Reduce carbon footprint: bulbs; cartridges; commuting; equipment; lights; mileage; recycle; sensors; thermostat; travel… www.greenbiz.com © 2009 Blackerby Associates, Inc. All Rights Reserved. - 13 - Income Statement - Survive Decrease SG&A Expenses (Cont) z z z z z z Smart supply chain: JIT, quality Reduce trips: buy weekly, monthly Ship smart: FEDEX, UPS web; join; 2-day Barter: www.premierbarter.com; www.nate.org Telecom: land lines; Skype; cell plan Insurance: raise deductible; trade assns: www.asba.com z 1-800-GOOG-411: free dir. asst., no ads z Take over maintenance © 2009 Blackerby Associates, Inc. All Rights Reserved. - 14 - Income Statement - Survive Cut Employees When Necessary z It’s not about those cut; it’s about the company and those who stay z Guy Kawasaki, The Art of the Layoff: blog.guykawasaki.com/2006/07/the_art_of_the_.html z Communicate! Explain conditions, strategy, vision, value of those staying z Use temps, interns to level workloads z Don’t fear unemployment tax; $7,000 base z Sub-lease unused space: strategic partner © 2009 Blackerby Associates, Inc. All Rights Reserved. - 15 - Cash Flow Statement - Survive Sources and Uses Due to Financing z Renegotiate loan rates z Renegotiate credit card rates z Apply for a line of credit: Business assets Business cash flow Personal guarantee Personal FICO score z Shop for merchant fees © 2009 Blackerby Associates, Inc. All Rights Reserved. - 16 - Cash Flow Statement - Thrive Sources and Uses Due to Investing z Invest in new product lines: Higher profitability ‘Green’ product lines z Invest in things ‘Green:’ USGBC LEED Building Certification www.usgbc.org/DisplayPage.aspx?CategoryID=19 LEED Accredited Professional REGREEN: Residential Remodeling Guidelines Avoid ‘greenwashing’ © 2009 Blackerby Associates, Inc. All Rights Reserved. - 17 - Cash Flow Statement - Thrive Sources and Uses Due to Investing z Angel Investment Tax Credit www.azcommerce.com/BusAsst/Incentives/Small+Business +Capital+Investment+Tax+Credit+Program.htm z Research & Development Tax Credit www.azcommerce.com/BusAsst/Incentives/RD+Income +Tax+Credit.htm © 2009 Blackerby Associates, Inc. All Rights Reserved. - 18 - Recession Goals n Survive z z z z z z z z z z z o Thrive Convert assets to cash Defer capital purchases Renegotiate liabilities Delay paying bills Increase selling activities Shop merchant services Outsource support Reduce carbon footprint Buy smarter Cut employees Renegotiate credit rates © 2009 Blackerby Associates, Inc. All Rights Reserved. z z z z z z z z z z z - 19 - Manage, reduce inventory Add new, ‘Green’ products Cut low-profit products Marketing: web 2.0; PR Automate for productivity Paperless systems Train for productivity Map, improve processes Invest in everything Green Apply for Line of Credit Invest in R&D