Thriving in Interesting Times Created by Will Katz, University of Kansas SBDC, June 2008

Thriving in Interesting TimesCreated by Will Katz, University of Kansas SBDC, June 2008 • Presented by the KU-KSBDC • What do we do? • How are we funded? • Why is it important to help small business?

May you live in interesting times… • We don’t know the origin of this apocryphal saying…but these are certainly interesting times, financially speaking!

Early summer of 2008: • Starbucks announced they were closing 600 stores • General Motors dropped below $10 per share…split adjusted lowest price since 1950’s • Two bank failures

Fall 2008 • Bear Stearns, AIG bailouts to the tune of over $100 BILLION. • Lehman Brothers NOT bailed out; 25,000 jobs go away • Washington Mutual—largest bank failure ever • Wachovia—purchased in FDIC rescue operation

Financial bailout passes both US House and US Senate…called “TARP” (Troubled Asset Relief Program) • $700 BILLION dollars • Now pushing a TRILLION dollars in total federal spending for “relief” or bailout or whatever you want to call it.

How much is a trillion? It is a million millions! A trillion dollars would buy 1000 boxes of Girl Scout cookies for every person in the USA A trillion seconds ago was more than 30,000 YEARS ago!

These are interesting times! • Dow Jones Industrial Average is down 40% from its highs • Fifteen bank failures as of 10/1/2008 • Two last year • Zero in 2005, 2006 • Inflation (as measured by CPI) is up • May be entering a recession, but no clear data yet

What can I do? • Practice CASH FLOW management • NEVER stop selling • Understand change

Practice CASH FLOW Management • I would never tell you that profits are not important. They are. • But profitable businesses can and do run out of cash. • When you run out of cash, you are DONE.

Practice CASH FLOW management • Remember that credit may be tougher to get than it was 2-3 years ago. Review your credit facility. Is it meeting your needs? • Initiate the conversation with your banker if you have trouble making a payment. Can they give you a payment-free month (or two or three) and add it to the end of the loan? • Can they re-structure, if necessary?

Practice CASH FLOW management • Are you getting terms from your vendors? If not, ask. If you get 10 days, ask for 30. • Develop procedures for late payments and accounts receivable. Don’t fall into the trap of dialing for dollars when you need them. Follow procedure.

Practice CASH FLOW management • Manage your inventory! Many small businesses tie up unnecessary dollars in inventory. Can you go from 3 inventory turns per year to 5? If so, that is cash in your pocket • Develop a financial triage plan. If you pay rent on the 7th instead of the first, you will still be in business. If you run payroll 6 days late, you will be OUT OF BUSINESS or at least out of employees.

NEVER stop selling! • Managing the top line is your most important job right now. ANY hired manager can control expenses, but it takes an entrepreneurial mindset to continue to work on revenues in these times. • Set goals, stretch goals, milestones • Communicate, communicate, communicate. Everybody needs to understand that revenues are EVERYBODY’s job

NEVER stop selling • Bring the focus back to one thing: YOUR competitive advantage. What is it? How do you talk about it? • You may not believe me, but you’d believe Warren Buffet • Acme Brick, GEICO, See’s Candies, Nebraska Furniture Mart • Three words: “sustainable competitive advantage”

NEVER stop selling • The tendency of many business people is to cut back on marketing expense • Instead, MEASURE marketing EFFICIENCY • ALWAYS ask people how they heard about you • Whatever is working, do more • This could be a time to GAIN market SHARE

Understand change • Times change. Marketplaces change. • Change is the only constant in business, right? • Back in the 70’s, I thought eight track tapes were here to stay. • What disruptive technologies might exist in your line of work?

Understand change • Nobody plans to fail, but many fail to plan • Eisenhower: “In preparing for battle I have always found that plans are useless, but planning is indispensable.”

Understand change • Tough times…INTERESTING times…require hard work and smart work • Companies that practice cash flow management, NEVER stop selling, and understand change will be well-positioned in the marketplace as we move forward

Thriving in Interesting Times Created by Will Katz, University of Kansas SBDC, June 2008