Why good stock and hardworking staff are key to surviving a downturn
Focus on stock levels and staff is essential
The old adage that 80 per cent of the profits come from just 20 per cent of the stock may be a truism, but in hard times reviewing stock can revolutionise your business. “Asking whether stock levels can be reduced is crucial,” argues Kelleher. “You might be sitting on far too much stock, and reducing the amount you hold can make all the difference. At the same time, you should review suppliers – are you relying too heavily on just one, and would you be in difficulty if your supplier failed?”
Consider reducing stock and getting rid of unprofitable lines entirely. To prepare for a downturn, Singleton argues, contingency plans are vital: “Review your marketing strategy – focus attention upon selling your most profitable products. You might even consider dropping the least profitable products during a difficult period.”
Talk to suppliers, and consider more frequent deliveries. Reducing your stock levels will allow you to respond more flexibly to your customers’ demands, and improve cashflow at the same time.
The recessions of the 80s and early 90s were marked by large numbers of business failures and redundancies, leaving a feeling that no one’s job was safe and further denting consumer confidence. Laying off staff should be a last resort, counsel the experts: “Take care of staff – be as upbeat as possible to preserve morale,” advises Singleton, “and be careful not to contravene employment regulations if you are forced to lay off workers.”
Indeed retaining key staff during times of economic slowdown may be your best chance of bouncing back when the upturn comes, say experts. “If you have to consider downsizing and laying people off, who do you offer redundancy to first?” ponders CBI spokesman Richard Dodd. “Do you let the ones who are keenest to leave go first? That could be a big mistake. The employees with the best employment prospects elsewhere are probably the ones you would least want to lose, and holding on to them could be your best bet.”
Sales are crucial in driving recovery, and sales staff – or your own salesmanship – should be the last in line for cuts.
Reducing your stock levels will allow you to respond more flexibly to your customers’ demands.