By: Mark A. Chinn, Attorney at Law
There are few businesses that have not suffered in the economy which some experts say started plunging into recession in November of 2007. This recession reached its peak when the markets exploded downward in the Fall of 2008. This makes any business person ask, “How do I survive in this environment, with the whole financial world seeming to collapse around me?” In this article, I will outline some solutions to this problem of survival. These solutions have been gleaned from many years of operating my own family law practice and reading and writing and speaking on topics of practice management.
Tip 1. Carefully Examine Your Business Model and Service. When there are cash flow problems, the first fear that any entrepreneur has is that he has done something to ruin his business. This fear is paralyzing at times and totally unproductive. The way to deal with this fear is to call a meeting of your trusted partners or employees and ask some questions and discuss them. These are some questions you can ask:
- Is there anything wrong with what we are trying to do here?
- Are we delivering the service that we promise?
- Have we had complaints that we need to address?
- Is there anything fundamentally wrong with the clientele we have been trying to reach?
Odds are that the conclusion of this meeting will be that there is nothing wrong with your business model or service. From this conclusion, you can then go forward with confidence to address the things affecting you from the outside.
Tip 2. Create A Plan and Identify the Final Safety Net. There is a temptation in crises to try and solve the problem all at once; to look for the “silver bullet” solution and go for it. Such a response might be a knee jerk decision to cut overhead by laying off significant numbers of employees who are really essential to delivering your companies service. This can be a big mistake. Instead, break your solutions to the problem down into phases and identify when each phase might be necessary. This will create a more methodical and measured response which is less likely to detract from your firm’s ability to deliver service or which might destroy morale. Here is an example:
Phase 1. Cut Unnecessary Expenses and lay off fringe or non essential personnel. Arrange credit line. Identify sources of funds for emergency.
Phase 2. Make significant overhead cuts, which would include salary and benefit reductions. Ask the employees for help and input into how they think this should be accomplished. In other words, empower your associates and employees to help save the company. Re-examine the products of the company, the pricing, and the targeted clientele. Make changes which may increase cash flow but which will not significantly change the companies’ brand of product or service.
Phase 3. More serious salary reductions or layoffs. This may involve a trimming of previously critical employees. Look for other expense cuts that were previously thought to be untouchable, such as health insurance for employees or pension matching programs.
Phase 4. Cut overhead to bare minimum and look at other areas of business previously eschewed to see if the economy has opened up another business niche after closing your previous niche.
Phase 5. What is the bottom line of survival. For most professionals, this may mean getting rid of all overhead and operating out of the home. Talk to people who already operate like that and find out what their lifestyle is like. You may find that lifestyle attractive, and therefore a solid safety net. In other words, there is no final disaster if everything doesn’t work out the way you planned.
Tip 3. Cut Expenses. Over the last 30 years that I have studied and practiced business, the thinking has generally been that the entrepreneur’s mentality should not be focusing on cuts in overhead, but increases in revenue. In other words, don’t count paper clips. Focus on getting clients in the door who will want to reward you financially for your service. This particular crises requires a different mind set in my opinion. This is a time to cut expenses. This is a time to throw some things overboard and make the ship lighter.
The way to start cutting expenses is to make a commitment to develop a new mentality of saving expense and money where ever possible. This should be done on both a personal and business level. I think many of us today remember that our parents had that mentality and maybe so did we, but most people lost that mentality in the business frenzy of the last thirty years. Start by making cuts off non-essentials. You might cut the fresh flowers in your reception room or the music on hold. You might cut personal expenses by eating at home more often or depriving yourself of simple luxuries such as a golf cart or a beauty treatment.
Cutting such expenses may not put a very big dent in the budget, but it will create a positive feeling that you are taking action to respond to the crises.
Tip 4. Get Help. Your associates, partners and even employees want to help. They know your business and they care about its success. They can give you answers that you would never think of. One way to do this is to meet with just a few of your most trusted associates or employees. Share the problems with them. Let them know what the company is facing. Tell them that cuts to overhead are generally not going to be significant until salaries and benefits are reduced. Tell them the choices you see. For example, one choice would be to lay off a number of people. Another would be to cut salaries by a percentage. Another would be cutting time worked or the taking of non paid vacations or sabbaticals. If you get positive feed back from your trusted group, ask them if they think the rest of the group would like to be involved. If that seems to be a positive avenue, have your trusted employees arrange a meeting of all of the employees and discuss the alternatives and come up with some solutions. Business books and coaches have preached for years that if you want to know how to create incentives for your employees, “just ask them what they want.” The same is true for how to respond to a crises. Ask the employees how they would like to respond. This will empower them and create ownership, which will be positive for them and the business.
Tip 5. Ropes Course Rules. Entrepreneurs are much like jungle animals: always on the alert for danger and disaster. This quality helps the entrepreneur be aware of what he needs to do to be successful. It also helps them to anticipate difficulty and plan ahead. Unfortunately, this quality can also be his enemy, because it can cause the entrepreneur to focus on the negative problem and not the positive solution. One example I use for this comes from a day when I participated in a ropes course exercise. I am afraid of heights. But one day I was asked to participate in a ropes course with a group. This required me to climb a wall and then navigate various ropes and wires strung a distance between trees about thirty feet in the air. Of course, participates are protected from real danger by protective wires, but the height and difficulty play with the mind. Though terrified of heights, I had no choice but to do the exercise because I wanted no one to know I had fear. On the first tight wire, I learned the following rules which I coach my clients to use in getting through adversity:
“Take one Step at a time.”
“Focus on your goal (i.e. the other tree)”
“Don’t look down (meaning, don’t allow yourself to think about how far you might fall)
“Remember, there is always a safety net.” (meaning, even if you fall, you are not likely to fall all the way to the group.)
Tip 6. Stay Positive. Our firm follows the motto that we “turn adversity into success.” We coach our clients in maintaining a positive attitude through difficult times and looking for ways to create a better life out of the storm. One image we like to use is the image of a surfer before a hurricane. Remember Jim Cantori from the weather channel standing at the point on the beach where the eye of the hurricane is expected. Almost without exception, he tells the camera to “pan back” to catch surfers taking advantage of the high pre-hurricane surf. These surfers are turning a destructive storm into the ride of a lifetime. We coach ourselves to handle difficulties in our practice by looking for ways to turn what appears to be an unfortunate outcome or response into a positive. We ask ourselves, “how can we turn this into an opportunity.” There are two aspects to this approach which are essential to remember. The first is that it is important to realistically appraise the danger. Keeping a positive attitude does not mean burying your head in the sand. The second aspect is that worrying about danger is a waste of time and can actually defeat you efforts to survive. Your mind set should be the same and Jon Elway facing a last minute drive for a touchdown and that probably sounds something like this in the huddle: “Okay guys, you know what we need to do, now lets go do it.”
Tip 7. Work Vigorously. Our firm coaches our clients that adversity is best faced by paying close attention to the health of their minds, their bodies and their spirit. This is also the motto on the wall of the YMCA. It is always good to pay attention to your overall health, but in crises, it is absolutely essential. It is well documented that physical activity improves the immune system and produces endorphins and other body chemicals that raise a persons spirits and capacities. Join a gym aeriobics or fitness class or hire a trainer and attend the training religiously three times a week for at least an hour. Train so hard you have to sit down for 20 mintues before you can even make it to the car or shower. Intense training will clear your mind and give you confidence. This will help you deal with crises.
Tip 8. Take it One Day at a Time. After evaluating your situation and developing plans for how to deal with it, take things one day at a time. Remember the ropes course image and just put one foot in front of the other. If you try to run to the next tree, you are likely to fall.
Instead of thinking, “Oh my goodness, I need $50,000 in the next three weeks or I’m going under, focus on what you can do today. Instead of focusing on all of the business you might need in the next thirty days to survive, focus solely on getting that next client. This mind set is so crucial to life, we find it all over in the spiritual and faith world. Those who study yoga are familiar with the concept of meditating on “being present.” In the Judeo Christian world, this philosophy is found in the Bible with scriptures such as “This is the day the Lord hath made, rejoice and be glad in it.” Or, “Do not be anxious about tomorrow.”
Conclusion. This is a different time. The ways of the past twenty or thirty years will not aid entrepreneurs in survival today. The mind set must turn from going full speed and spending whatever it take, to getting lean and focusing on net profit instead of big dollars. Survival is not for the feint of heart and it does not come naturally to most. Any one who wishes to survive must develop new habits and be willing to take unpleasant steps, such as terminating valued employees. The survivor must accurately appraise his danger but never focus on it. The survivor becomes the conqueror when he practices an attitude of turning adversity into success.
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Mark A. Chinn operates a family law practice in
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