By Wayne Rivers

This article is Part 4 of a series outlining the 90 best practices of successful family and closely held businesses and the actions which allow companies to weather economic storms. The 90 best practices don’t necessarily appear in order of priority, and, due to your particular circumstances, some of the practices will be more or less valuable to your closely held company. They will not be presented as exhaustive analyses; rather, each article will touch on a few of the best practices with a very brief explanation. More depth on each of the topics is as close as doing internet research or making a phone call to The Family Business Institute. As you read the series of articles, please try to select the highest impact practices upon which to focus. Trying to get your mind around all 90 best practices simultaneously would be like trying to enjoy a drink of water through a fire hose.

The best practices will be concentrated in five distinct categories: 1. Cash flow, 2. Belt tightening & cost reduction, 3. Processes & systems, 4. Opportunities, and 5. What to avoid or of what to be wary. We hope this series is beneficial in helping you prosper in tough times.

18. Failing to communicate internally (What to avoid or of what to be wary)

Most closely held business leaders are people of relatively few words, the strong, silent, Gary Cooper types. There is nothing wrong with that style of communication and leadership. However, during these tumultuous times, it’s important for business leaders to make sure they are communicating to the rest of the team what the plans are. How is the company going to weather the current economic crisis? What changes need to get made? What new business in in the pipeline? Are there any reasons for optimism? Failure to communicate regularly with the team during difficult times increases fear and anxiety. On the other hand, communicating regularly and honestly helps calm their fears and reassures the team that the leaders understand the current economic mess, have plans to deal with it, and there is a realistic hope that the company will emerge from this period stronger than ever. Leadership is about charting a safe path among the wreckage, and a component of leadership is communicating what exactly the safe path is.

19. Failing to communicate externally. (What to avoid or of what to be wary)

Bankers and other advisors do not like surprises. If you think you might be in danger of not meeting your loan covenants or missing payments altogether, its much better to raise the issue yourself rather than letting your lenders find out the hard way. Being proactive increases your chances for working out a win-win solution rather than having your lenders dictate behavior to you.

20. Loss of focus on your core business (What to avoid or of what to be wary)

Several years ago a young man who was successfully operating his father’s business came to us in frustration. Dad, quite the entrepreneur, had handed the reins of the original business over to the son and started a new enterprise. The son was frustrated because he was responsible for producing profits in the original company, yet Dad’s new entrepreneurial venture was sucking profits and cash out. What was a frustration a few years ago could be a full blown crisis today. Back then, the company was making sufficient money to be able to support both businesses. However, in times of recession, that is a luxury you probably can’t afford. Define what it is that constitutes your core business and STICK TO IT! Never say never to entrepreneurial opportunities, but make sure the goose that lays golden eggs remains healthy in order to lay golden eggs after the current recession is over.

21. Developing a marketing plan with accountability. (Opportunities)

In the last seven or eight years, many companies haven’t given too much thought to their marketing plans. There were so many business opportunities that it almost seemed as if customers would find you rather than the other way around. That’s not necessarily the case today. It seems that in every recession we get calls from companies that say, “I need to put together a marketing plan right now.” The best time to have created a marketing plan was actually two years ago, but since we can’t do anything about changing history, developing a plan now is better than not having a plan at all. A good marketing plan is based on formal or informal customer research. Your customers, suppliers, and advisors may have insightful things to tell you that may surprise you about your business and your core competencies. A second component of a good marketing plan is to analyze current market outreach—including your website—for its return on investment (ROI). No marketing plan is complete without assigning accountability; someone on the team should be giving you weekly progress and status updates on the implementation of the marketing plan.

In every downturn, some companies not only survive but prosper. We earnestly hope this series will help you reach your fullest potential.

 The 90 Best Practices for Recession Survival (and Maybe Prosperity): Part 5

Wayne Rivers is the president of The Family Business Institute, Inc. FBI’s mission is to deliver interpersonal, operational and financial solutions to help family and closely-held businesses achieve breakthrough success.
February 2009