Presented by the KU-KSBDCPresented by the KU-KSBDC What do we do?What do we do? How are we funded?How are we funded? Why is it important to help small business?Why is it important to help small business?

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

May you live in interesting times…May you live in interesting times…

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

Early summer of 2008:Early summer of 2008: Starbucks announced they were closing 600 storesStarbucks announced they were closing 600 stores General Motors dropped below $10 per share…split General Motors dropped below $10 per share…split

adjusted lowest price since 1950’sadjusted lowest price since 1950’s Two bank failuresTwo bank failures

Fall 2008Fall 2008 Bear Stearns, AIG bailouts to the tune of over $100 Bear Stearns, AIG bailouts to the tune of over $100

BILLION.BILLION. Lehman Brothers NOT bailed out; 25,000 jobs go Lehman Brothers NOT bailed out; 25,000 jobs go

awayaway Washington Mutual—largest bank failure everWashington Mutual—largest bank failure ever Wachovia—purchased in FDIC rescue operationWachovia—purchased in FDIC rescue operation

Financial bailout passes both US House and US Financial bailout passes both US House and US Senate…called “TARP” (Troubled Asset Relief Program)Senate…called “TARP” (Troubled Asset Relief Program)

$700 BILLION dollars$700 BILLION dollars Now pushing a TRILLION dollars in total federal Now pushing a TRILLION dollars in total federal

spending for “relief” or bailout or whatever you want to spending for “relief” or bailout or whatever you want to call it.call it.

How much is a trillion? How much is a trillion?

It is a million millions!It is a million millions!

A trillion dollars would buy 1000 boxes of Girl Scout A trillion dollars would buy 1000 boxes of Girl Scout cookies for every person in the USAcookies for every person in the USA

A trillion seconds ago was more than 30,000 YEARS ago!A trillion seconds ago was more than 30,000 YEARS ago!

These are interesting times!These are interesting times!

Dow Jones Industrial Average is down 40% from its Dow Jones Industrial Average is down 40% from its highshighs

Fifteen bank failures as of 10/1/2008Fifteen bank failures as of 10/1/2008 Two last yearTwo last year Zero in 2005, 2006Zero in 2005, 2006 Inflation (as measured by CPI) is upInflation (as measured by CPI) is up May be entering a recession, but no clear data yetMay be entering a recession, but no clear data yet

What can I do?What can I do?

1.1. Practice CASH FLOW managementPractice CASH FLOW management

2.2. NEVER stop sellingNEVER stop selling

3.3. Understand changeUnderstand change

Practice CASH FLOW Practice CASH FLOW ManagementManagement

I would never tell you that profits are not important. They I would never tell you that profits are not important. They are.are.

But profitable businesses can and do run out of cash.But profitable businesses can and do run out of cash. When you run out of cash, you are DONE.When you run out of cash, you are DONE.

Practice CASH FLOW Practice CASH FLOW managementmanagement

Remember that credit may be tougher to get than it was Remember that credit may be tougher to get than it was 2-3 years ago. Review your credit facility. Is it meeting 2-3 years ago. Review your credit facility. Is it meeting your needs?your needs?

Initiate the conversation with your banker if you have Initiate the conversation with your banker if you have trouble making a payment. Can they give you a trouble making a payment. Can they give you a payment-free month (or two or three) and add it to the payment-free month (or two or three) and add it to the end of the loan?end of the loan?

Can they re-structure, if necessary?Can they re-structure, if necessary?

Practice CASH FLOW Practice CASH FLOW managementmanagement

Are you getting terms from your vendors? If not, ask. If Are you getting terms from your vendors? If not, ask. If you get 10 days, ask for 30.you get 10 days, ask for 30.

Develop procedures for late payments and accounts Develop procedures for late payments and accounts receivable. Don’t fall into the trap of dialing for dollars receivable. Don’t fall into the trap of dialing for dollars when you need them. Follow procedure.when you need them. Follow procedure.

Practice CASH FLOW Practice CASH FLOW managementmanagement

Manage your inventory! Many small businesses tie up Manage your inventory! Many small businesses tie up unnecessary dollars in inventory. Can you go from 3 unnecessary dollars in inventory. Can you go from 3 inventory turns per year to 5? If so, that is cash in your inventory turns per year to 5? If so, that is cash in your pocketpocket

Develop a financial triage plan. If you pay rent on the 7Develop a financial triage plan. If you pay rent on the 7thth instead of the first, you will still be in business. If you run 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 payroll 6 days late, you will be OUT OF BUSINESS or at least out of employees.least out of employees.

NEVER stop selling!NEVER stop selling!

Managing the top line is your most important job right Managing the top line is your most important job right now. ANY hired manager can control expenses, but it now. ANY hired manager can control expenses, but it takes an entrepreneurial mindset to continue to work on takes an entrepreneurial mindset to continue to work on revenues in these times.revenues in these times.

Set goals, stretch goals, milestonesSet goals, stretch goals, milestones Communicate, communicate, communicate. Everybody Communicate, communicate, communicate. Everybody

needs to understand that revenues are EVERYBODY’s needs to understand that revenues are EVERYBODY’s jobjob

NEVER stop sellingNEVER stop selling

Bring the focus back to one thing: YOUR competitive Bring the focus back to one thing: YOUR competitive advantage. What is it? How do you talk about it?advantage. What is it? How do you talk about it?

You may not believe me, but you’d believe Warren BuffetYou may not believe me, but you’d believe Warren Buffet Acme Brick, GEICO, See’s Candies, Nebraska Furniture Acme Brick, GEICO, See’s Candies, Nebraska Furniture

MartMart Three words: “sustainable competitive advantage”Three words: “sustainable competitive advantage”

NEVER stop sellingNEVER stop selling

The tendency of many business people is to cut back on The tendency of many business people is to cut back on marketing expensemarketing expense

Instead, MEASURE marketing EFFICIENCYInstead, MEASURE marketing EFFICIENCY ALWAYS ask people how they heard about youALWAYS ask people how they heard about you Whatever is working, do moreWhatever is working, do more This could be a time to GAIN market SHARE This could be a time to GAIN market SHARE

Understand changeUnderstand change

Times change. Marketplaces change.Times change. Marketplaces change. Change is the only constant in business, right?Change is the only constant in business, right? Back in the 70’s, I thought eight track tapes were here to Back in the 70’s, I thought eight track tapes were here to

stay.stay. What disruptive technologies might exist in your line of What disruptive technologies might exist in your line of

work?work?

Understand changeUnderstand change Nobody plans to fail, but many fail to planNobody plans to fail, but many fail to plan Eisenhower: “In preparing for battle I have always found Eisenhower: “In preparing for battle I have always found

that plans are useless, but planning is indispensable.” that plans are useless, but planning is indispensable.”

Understand changeUnderstand change

Tough times…INTERESTING times…require hard work Tough times…INTERESTING times…require hard work and smart workand smart work

Companies that practice cash flow management, Companies that practice cash flow management, NEVER stop selling, and understand change will be well-NEVER stop selling, and understand change will be well-positioned in the marketplace as we move forwardpositioned in the marketplace as we move forward