Helping Protect and Improve Corporate Profits
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As Advisors, Restructuring Officers and Interim Managers, the professionals of Focus Management Group support their corporate clients by focusing on short and long-term improvement strategies. In part this is dependent on economic growth both domestically and internationally. To that extent there is great concern regarding our country’s ability to drive an economic recovery further into 2011, 2012 and are questioning 2013.
Before highlighting a few reasons for concern, let us state the purpose of this piece directed towards small and mid-size Enterprises: Be proactive: protect and improve corporate profits, even if your sales slowdown!
- Manage margins, not gross sales.
- Evaluate customers and contracts based on gross margin metrics.
- If your company or larger clients receive appropriations from the government, plan on significant reductions starting in
2012 (prepare for the worst case).
- Diversify sales and risks.
- Implement a plan to convert at least 15 percent of your fixed expenses to variable expenses.
- Measure the “productivity factor” of each employee – reward achievers, create openings for superstars and terminate the
bottom 10- 20 percent.
- In conjunction with the above, if your company enjoys a stellar reputation, hire your strongest competitors’ sales,
marketing and operational talent.
- Stockpile cash; liquidate inventory with low turnovers; implement tighter credit terms; review manufacturing and/or services processes; utilize buying pressure to improve margins.
- Reduce collection time through the implementation of a simple billing practice.
- Generate a weekly cash flow forecast and variance report; implemented correctly, there is no greater management tool that
integrates the sales pipeline, operations, financial and resource planning.
Why are we concerned that the economy may slowdown and corporate profits will suffer?
- US credit has been downgraded.
- On August 4th JPMorgan cut its forecast for US third-quarter growth to 1.5 percent from 2.5 percent and stated, “The first
half of next year’s GDP growth would be less than initially forecasted – down 1.5 percent to 2 percent.”
- National unemployment is at 9.2 percent.
- Our President signed a debt ceiling extension that many economists and business reporters termed “kicking the can down the
- Italy, Spain, Greece and Portugal represent substantial risk to Europe’s growth prospects, which is an international problem.
- Europe’s finance committee issued statements on Aug 4th that indicated a policy shift from tightening rates to lowering
rates, sending international stock markets down 2-4 percent.
- China is fighting inflation and hoping for a “soft landing” while India and Brazil are taking hard-lined financial
approaches to dealing with its inflationary growth.
Perhaps ongoing fears about further economic slowdown and a “Double Dip” recession prove to be unfounded. Perhaps it’s a concern that we have three constituencies in DC (Democrats, Republicans and Tea Party) and it’s not “business as usual”. Possibly the Fed will announce a program in late August when it concludes its meeting in Jackson Hole, WY, that will encourage banks to lend again and America will progress toward real, sustainable economic growth. Or maybe companies will start hiring. Will there be a QE 3 that supports the stock market, making consumers feel better? Whatever the case, the reality is that speculation and uncertainty in the US economy in general are extremely high.
Many financial, legal and restructuring firms are vocal that the next downward spiral is inevitable, their logic being that banks have not dealt with all their problem loans, investment capital will be very difficult to obtain, companies will be unable to refinance, consumers are not spending and poorly prepared businesses will fail…
No one can guarantee success, however your business will derive a key competitive advantage by following the steps identified above. Pre¬pare today to make money even if your business slows down – that’s your challenge, starting immediately!
We recognize that acceptance and implementation of these concepts may be unsettling to business owners. They represent a mindset change for many entrepreneurs who perhaps have only dealt with growth and success to date. The professionals at Focus Management Group can help an enterprise embrace change and unlock full potential for profitability and earnings.
The concepts outlined above represent a new disciplined approach to business management, a more hard-edged and results-driven approach focused on the bottom line. There is a critical productivity factor for every industry and if your employees don’t meet that index, you are paying too much in compensation, regardless of how long your employees may have worked for you. As a businessperson you are accustomed to taking risks, however by following the steps outlined above – if implemented properly – you have an opportunity to significantly reduce risk associated with economic slowdown. Alternatively, if GDP improves in the 4th quarter and into 2012, you will be position to capitalize far more than if you had not taken these steps, a true WIN-WIN.
About the Author:
John Bambach is a highly accomplished executive with over 20 years of experience serving as Chief Executive Of¬ficer, Chief Restructuring Officer, Chief Financial Officer and Chapter 11 Trustee in diversified industries, including technology‐based businesses, telecommunications, finance, construction and manufacturing. During his career, John has successfully improved the operations and profitability of numerous distressed organizations. John’s experiences include assisting start‐up businesses, aiding in out of court restructurings, and restoring profitability. Highlights of John’s career include serving as Interim CFO and CRO to a publishing company to drive a turnaround. John also acted as CEO/CFO to a telecommunications corporation, engineering the turnaround of a cable property that achieved breakeven. John earned his M.B.A from New York Institute of Technology and holds a Bachelor of Science in Psychology from LaSalle University. John can be reached at email@example.com or by calling (610) 574-1127.
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