S&G Navigating The Recession 061609
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Navigating The Recession

Navigating The Recession
Curtis A. Feldman, CPA
© Shepherd & Goldstein LLP

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S&G Navigating The Recession 061609 Presentation Transcript

  • 1. Navigating The Recession June 16, 2009 Presented By: Sponsored By:
  • 2. Navigating The Recession I. Introduction Shepherd & Goldstein ~ Curtis A. Feldman, CPA TD Banknorth ~ Ed Nunes Curtis A. Feldman, CPA 2 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 3. Navigating The Recession Shepherd & Goldstein’s service focus is – Making a difference in our client’s lives via our Advisory and Business Development Services. Curtis A. Feldman, CPA 3 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 4. Table of Contents I. Introduction II. Change is Necessary III. Four Essential Ingredients in Recession Navigation 1. Stabilize the Business 2. Revise Your Value Proposition and Increase Sales 3. Modify/Change Operations 4. Cash is King IV. Financial Management of the Business V. In Conclusion Handouts Customer Centricity Checklist Navigating Through The Economic Crisis Articles Seminar evaluation Curtis A. Feldman, CPA 4 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 5. Navigating The Recession II. Change is necessary Curtis A. Feldman, CPA 5 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 6. Navigating The Recession “May you live in interesting times” Ancient Chinese Curse Curtis A. Feldman, CPA 6 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 7. What Recession? “Our Company has chosen to not participate in the current recession” Quote from an anonymous CEO Curtis A. Feldman, CPA 7 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 8. A Whole New World Of Challenges From: • Real estate to stock investments, to • Credit line decreases, to • Credit unavailability, to • Massive layoffs/termination, to • Home foreclosures, to • Bankruptcies and Business closings Both consumers and businesses have been hit and hit hard! Curtis A. Feldman, CPA 8 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 9. A Whole New World Of Challenges Stuck in a ‘do nothing’ strategy? • Frozen in inaction because of the vastness of economic change? • Riding it out and waiting for things to return to where they were? • Making small unconnected changes here and there? “Given the vastness of the economic change now under way, the temptation for many planners will be to gaze mesmerized at the unfolding crisis.” McKinsey Quarterly April, 2009 Curtis A. Feldman, CPA 9 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 10. A Whole New World Of Challenges Who Moved My Cheese When mice lose their food source, they go off to find another. But when humans lose something, they’re likely to stay put, hoping it will somehow appear. We weren’t raised to adapt to change. Spencer Johnson, Author People Magazine May 1, 2000 Moral ~ The wisest response is not to wait or whine, but to suck it up and deal with it. Curtis A. Feldman, CPA 10 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 11. Immediate And Long-Term Trends Curtis A. Feldman, CPA 11 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 12. 1st Lack Of Consumer Capacity Three ways to sustain consumption • Earn money • Borrow • Spend down savings Curtis A. Feldman, CPA 12 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 13. Retail Sales Curtis A. Feldman, CPA 13 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 14. Unemployment Claims Curtis A. Feldman, CPA 14 Source: © Shepherd & Risk Blog and RANONE Calculated Goldstein LLP June, 2009
  • 15. Mortgage Equity Withdrawals Curtis A. Feldman, CPA 15 Source: © Shepherd & Risk Blog and RANONE Calculated Goldstein LLP June, 2009
  • 16. Case-Shiller Real Estate Index, Year/Year Change Curtis A. Feldman, CPA 16 Source: © Shepherd & Goldstein LLPOffice Congressional Budget and RANONE June, 2009
  • 17. Personal Saving Rate Curtis A. Feldman, CPA 17 Source: © Shepherd & Goldstein LLP and RANONE Baseline June, 2009
  • 18. 2nd The Aging Of America Curtis A. Feldman, CPA 18 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 19. 3rd The Need For Tax Increases • Budget Deficit • Boomer’s o Social Security o Healthcare Curtis A. Feldman, CPA 19 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 20. Accept And Maintain Control • Employees are looking for your strong leadership and inspirational voice. • Acknowledge the extreme difficult environment we’re in, but also accept it. • After acceptance you can focus your attention on a corrective plan. Curtis A. Feldman, CPA 20 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 21. Be Proactive In The Seven Habits of Highly Effective Business, Stephen Covey defines his habit number one, being proactive, as following: “It means more than merely taking initiative. It means as human beings we are responsible for our own lives. Our behavior is a function of our decisions, not our conditions.” Curtis A. Feldman, CPA 21 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 22. Be Proactive Conditions are unpleasant • Lots of troubling things happening • Don’t waste time worrying about them • You can’t directly change them Direct time to things you can control: the choices on how you are going to move forward Curtis A. Feldman, CPA 22 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 23. A Whole New World Of Challenges “This is not a cycle, this a reset.” Jeff Immelt GE Chief Executive Officer “If this is a reset, it’s time to reorganize… structures for today’s realities, rather than cling to the sensibilities of the 20th century.” Tom Brokow NY Times April 20, 2009 Curtis A. Feldman, CPA 23 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 24. Don't Sit Back And Become A Victim Of The Times Right now there are businesses and market segments that are making record profits. • Find new markets at higher prices • Be open to consider all new opportunities • Be pro-active; Re-invent yourself! It’s time to ACT! Curtis A. Feldman, CPA 24 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 25. Leading Change To minimize a team’s resistance to change, you must be seen to be actively involved in working on a lot of little things – not all at once, but systematically designing, implementing, reviewing, redesigning, measuring, and most importantly, not subsequently ignoring. Curtis A. Feldman, CPA 25 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 26. What’s The Current Global View? • Finding opportunity in turmoil o by entering new markets where weakened competitors are; o hiring talent that would otherwise not be available; o seeking M&A opportunities. • Smaller & private companies are in a better position to react quickly McKinsey survey done in Nov.’08 Curtis A. Feldman, CPA 26 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 27. Help is on the way American Recovery and Reinvestment Act of 2009, signed into law 2/17/09 – $288 Billion - tax relief (not much for small business owners) – $144 Billion - State & Fiscal relief – $111 - Infrastructure & Science – $81 Billion - Protecting the Vulnerable – $59 Billion - Healthcare – $53 Billion - Education & Training – $43 Billion - Energy – $8 Billion - Other Curtis A. Feldman, CPA 27 © Shepherd & Goldstein LLP and RANONE April, 2009
  • 28. What’s The Current Global View? What steps, if any, has your company taken or does your company plan to take in the rest of 2009 as a result of the global economic crisis? 0% 10% 20% 30% 40% 50% 60% 70% 80% Opportunities Reduce operating costs 75% Increase productivity 44% Reduce capital investments 37% Introduce new products/services to gain market share 34% from weakended competitors Restructure 28% Seek merger or acquisition opportunities 22% Hire talent that would not have been available 16% otherwise Leave certain markets 11% % of respondents, 1 n=1424 increase hedging 5% *Respondents that answered “other” or “do not know” are not shown. No steps 4% 1 The McKinsey survey was in the field from November 5, 2008, to November 10, 2008. It includes responses from 1,424 executives from all regions, industries, and functional specialties. Forty-one percent represent public companies, and 48 percent represent private ones (the rest are government-owned or not-for-profit). Fifty-one percent have annual revenues below $1 billion, and 43 percent have $1 billion or more. Curtis A. Feldman, CPA 28 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 29. What’s The Current Global View? Area’s Slated for Cutbacks in 2009 Hiring 75% Capital Spending 64% Layoffs 44% 38% Salary & Benefits Freeze Survey of over300 CFO’s, according to the First Quarter 2009 responses conducted by Financial Executive International and Baruch College’s Zicklin School of Business. Curtis A. Feldman, CPA 29 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 30. What’s The Current Global View? CEOs see dire need for action to deal with recession The global economic turmoil has made the mood at this year's World Economic Forum in Davos, Switzerland, markedly more subdued than in previous years. A survey by PricewaterhouseCoopers of 1,100 CEOs, presented at the forum, concludes that corporate leaders think the need for action to cope with the economic downturn is urgent. Only 21% of them were confident about increasing revenue during the next 12 months, a severe decline from the 50% a year ago. Reuters (1/28/09) Curtis A. Feldman, CPA 30 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 31. When Do You Expect An Economic Upturn To Begin? By region % of respondents, 1 n=1424 Other Asia- North developing Total Pacific Europe America China India markets By March 2009 3 2 3 1 3 8 6 Apr-June 2009 10 7 8 12 12 19 12 Jul-Sep 2009 17 10 14 20 19 16 16 Oct-Dec 2009 22 29 21 24 19 24 19 Total by the end of 2009 51% 48% 45% 57% 53% 67% 52% Total by 2010 or later 46% 51% 52% 40% 47% 29% 44% *Respondents that answered “other” or “do not know” are not shown. 1 The survey was in the field from November 5, 2008, to November 10, 2008. It includes responses from 1,424 executives from all regions, industries, and functional specialties. Forty-one percent represent public companies, and 48 percent represent private ones (the rest are government- owned or not-for-profit). Fifty-one percent have annual revenues below $1 billion, and 43 percent have $1 billion or more. Curtis A. Feldman, CPA 31 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 32. The Recession? It’s Over, Says Economist Jobless claims have peaked, says a member of the bureau charged with declaring when US recession begin and end. And in every recession since 1974, the peak in jobless claims has come within weeks of the bottom. According to Robert J. Gordon, one of seven members of the elite Business Cycle Dating Committee of the National Bureau of Economic Analysis, who decide officially, for the record books, when recessions begin and end – usually many months after the fact when the decision is rally obvious. MSN Money 05/21/09 Curtis A. Feldman, CPA 32 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 33. Americans Feel Better About Economy Stocks were soaring after the Conference Board’s report on consumer confidence showed a reading of 54.9 in May, a surge from the upwardly revised reading of 40.8 in April. Economists had been looking for a reading of 43. “Expectations are that business conditions, the labor market and incomes will improve in the coming months,” said Lynn Franco, director of the Conference Board’s Consumer Research Center. “While confidence is still weak by historical standards, as far as consumers are concerned, the worst is now behind us.” MSN Money 05/26/09 Curtis A. Feldman, CPA 33 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 34. Americans Feel Better About Economy “Expectations about the job market ahead improved much more, with 20% now indicating they expect there to be more jobs in six months than now,” David Resler, the chief economist at Nomura Securities, wrote in a note to clients this morning. “The improvement in the confidence index also appears to have put more people in the mood to spend on cars and appliances but caution about the housing market persists. Overall however, the improved mood of consumers is encouraging. MSN Money 05/26/09 Curtis A. Feldman, CPA 34 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 35. Americans Feel Better About Economy The end of the recession is in sight Do not lose your sense of urgency Do not allow complacency to set in Keep you and your team focused on the challenges that still are ahead of us. Curtis A. Feldman, CPA 35 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 36. The 4 Essential Ingredients 1. Stabilize The Business 2. Review Your Value Proposition and Increase Sales 3. Modify/Change Operations 4. Cash is King Curtis A. Feldman, CPA 36 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 37. Stabilize The Business Slow down or stop leaks in your business • Cut employee costs to match current and future sales activity • Review vendors costs by renegotiating prices or changing vendors • Eliminate unnecessary costs • Identify all sources of cash o Sell business assets not fully utilized o Sell of slow moving inventory o Secure external borrowing sources o Tap personal assets Curtis A. Feldman, CPA 37 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 38. Stabilize The Business Identify Customers At Risk • Meet with them • Resolve issues/concerns • Flatter them with attention • Continually monitor performance by asking for feedback Curtis A. Feldman, CPA 38 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 39. Stabilize The Business Gross Margins • Address major gross margin problems chewing up cash • Review and eliminate product lines/services with losses or low margins Curtis A. Feldman, CPA 39 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 40. Value Proposition And Sales • How do you make money? • Who are your customers? • Why do they buy from you? o Location? o Price? o Convenience? o Value? o Guarantee or warranty? o Customer service an support? o Quality? o Something unique? Curtis A. Feldman, CPA 40 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 41. Revise Your Value Proposition Changing Value Proposition To Meet New Spending Attitudes • Emphasize price • Emphasize value • Emphasize personal touch • Shrink sizes as lower cost alternative • Offer financing Brain Storm! Curtis A. Feldman, CPA 41 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 42. Value Proposition And Sales Why do Customers stop doing business with someone? Curtis A. Feldman, CPA 42 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 43. Value Proposition And Sales Chart of Why People Leave More convenient to purchase elsewhere 3% Relationship (family/friend) 9% Miscellaneous 5% Product/Price/ Time 15% Curtis A. Feldman, CPA 32% 43 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 44. Value Proposition And Sales So why do customers search around for a new provider? Curtis A. Feldman, CPA 44 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 45. Value Proposition And Sales 68% of customers who leave for a competitor do so because of Perceived Indifference Curtis A. Feldman, CPA 45 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 46. Value Proposition And Sales This means virtually 7 out of 10 inquiries lost, walk away because they feel the business is indifferent to them. Curtis A. Feldman, CPA 46 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 47. Value Proposition And Sales It’s SIMPLE right? So Why Doesn’t Everyone do it or over time Forget? Curtis A. Feldman, CPA 47 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 48. Value Proposition And Sales So What Can You Do About It? Remember that it is much easier and less expensive to keep an existing customer than trying to get new ones! Curtis A. Feldman, CPA 48 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 49. Value Proposition And Sales Awesome Service Manage your business through the eyes of your customer. Remove obstacles and hindrances in doing business with you. Curtis A. Feldman, CPA 49 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 50. Value Proposition And Sales Customer-Centricity Checklist (delivering quality service) (handout) Curtis A. Feldman, CPA 50 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 51. Value Proposition And Sales Customer Commitment 10 Point Checklist for New Ideas Customers for Life: How to Turn That One Time Buyer Into A Lifetime Customer (Carl Sewell and Paul Brown) Curtis A. Feldman, CPA 51 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 52. Value Proposition And Sales 10 Point Checklist for New Ideas – Customers for Life: How to Turn That One Time Buyer Into A Lifetime Customer (Carl Sewell and Paul Brown) 1. What’s the benefit to the customer? 2. Will the customer easily understand that fact? 3. What impact will this idea, program or system have on our employees? 4. How will it effect our existing systems? Curtis A. Feldman, CPA 52 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 53. Value Proposition And Sales 5. Is anybody else doing it successfully? What can we learn from their experience? 6. What could go wrong? 7. Will it give us an advantage over our competitors? 8. How much will it cost? 9. Will it make money 10. When should we evaluate it? Curtis A. Feldman, CPA 53 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 54. Participant Exercise • Use one of your own customer service strategies or pick out a new one from the customer centricity checklist. • Apply 10 Point Checklist for New Ideas – Customers for Life: How to Turn That One Time Buyer Into A Lifetime Customer (Carl Sewell and Paul Brown) to see if your strategy passes the test. Curtis A. Feldman, CPA 54 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 55. Value Proposition And Sales Increasing Sales Ideas 10 Common Strategies Curtis A. Feldman, CPA 55 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 56. 10 Common Strategies For Increasing Sales & Profitability 1. Implement systems that measure and track the results of ALL of your marketing, advertising and publicity efforts. 2. Look for new ways to re-position products or services you provide to attract a new market segment. 3. Find new distribution channels for your products through the Internet or through others who are selling complimentary products or services. 4. Create joint venture arrangements with other complimentary, not competing businesses. Curtis A. Feldman, CPA 56 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 57. 10 Common Strategies For Increasing Sales & Profitability 5. Create a "Rewards Referral Program" for your existing customers. 6. Know the numbers in your business. Find out what products and services make the most profits and which ones make the least. Can you increase that amount by 10% by adding or bundling in extra value? 7. Position yourself as the "Knowledgeable Expert" in your field and write articles for newspapers or trade journals and/or do radio. Curtis A. Feldman, CPA 57 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 58. 10 Common Strategies For Increasing Sales & Profitability 8. Differentiate yourself from the competition and give customers “reasons why" they should do business with you versus your competitors; 9. Improve your skills as a marketer. Consider having a business and marketing coach to assist you with new ideas. 10. Build stronger relationships with your customer base through frequent contact, special offers, and newsletters. Survey your existing customers to see what they want and then sell it to them. Curtis A. Feldman, CPA 58 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 59. Increasing Sales Ideas How To Increase The Average Sale? Some strategies you can use to increase your average transaction value: • Cross Selling • Upselling • Bundling • Merchandising • Margins and Pricing Develop a sales system that includes these strategies to ensure consistency among team members Curtis A. Feldman, CPA 59 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 60. Increasing The Average Sale Cross Selling • Selling other items with an initial purchase • Suggest items to complement the purchase • Key questions can help identify opportunities • Create ‘checklists’ of items to consistently offer Curtis A. Feldman, CPA 60 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 61. Increasing The Average Sale Cross Selling Example • What else could we offer to accompany this purchase? • What else would add value and make the use of this product or service better? • What else, when coupled with this product or service, would help customers get the most out of it? Curtis A. Feldman, CPA 61 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 62. Increasing The Average Sale Up-Selling • Encourage the customer to move from purchasing a lower end item to a higher end one • Offer products or services in 3 or more tiers: o Best or ‘High End’ o Better or ‘Midrange’ o Good or ‘Basic’ • Statistics show that most customers will select the second tier item when presented with these options Curtis A. Feldman, CPA 62 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 63. Increasing The Average Sale Packaging • Put complementary products or services together into a single attractive package o Products and products o Services and services o Products and services • Creates a high perceived value • Or…sell upgrades separate from original purchase (movie ticket and popcorn) Curtis A. Feldman, CPA 63 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 64. Increasing The Average Sale “Fire your clients” Categorize your clients • By profitability • By growth potential • By size • By payment history Curtis A. Feldman, CPA 64 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 65. Analyze Your Customer Mix • Get rid of your “bad customers” o High demands, a lot of complaints o Low profit levels • Use the extra time, energy and resources to win the new good customers you want. Curtis A. Feldman, CPA 65 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 66. Modify/Change Operations 1. Inventory and Vendors 2. Marketing, Sales and Pricing 3. Systems and Processes 4. Team/Employees Curtis A. Feldman, CPA 66 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 67. Modify/Change Operations Inventory • Look at how you manage your inventory o Have enough of the right products in stock but o Don’t tie up valuable working capital by holding excess inventory Despite the improvement in gasoline prices, retailers still face many challenges from over-extended, under-capitalized consumers," said Stacy Janiak, vice chairman and U.S. Retail leader, Deloitte LLP. "Consumers today want to see significant discounts before they are willing to part ways with their wallets. Retailers should focus on their inventory assortment, sourcing and pricing strategies, as well as supply chain management opportunities, to drive value through the system and to the end customer. Retailers without the right value proposition will find an increasingly difficult operating environment." Curtis A. Feldman, CPA 67 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 68. Modify/Change Operations Use your vendors to preserve your cash on hand • Extend payment terms • Pricing concessions (everyone is asking it seems) • Risk of supply disruption (e.g. your major supplier goes out of business) Curtis A. Feldman, CPA 68 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 69. Modify/Change Operations Product pricing Prices too high? Lowering Prices Is Not Always The Answer. • Are you being undercut on prices? Are similar but cheaper items selling quicker? Are customers complaining that you prices aren’t competitive? • Often the first thought in a business is to reduce prices to stimulate sales and it can work, but at what cost? Curtis A. Feldman, CPA 69 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 70. Modify/Change Operations Caution before reducing prices! • If you are going to reduce your prices, first reduce your production or purchasing costs. If you don’t, you’re likely making your problems worse. • Before reducing prices, be sure you know the reason why sales are slowing. It might not be price. • Look at alternatives to reducing prices. Marketing, advertising and packaging can all help increase sales Curtis A. Feldman, CPA 70 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 71. Modify/Change Operations “The Office” – Let’s see what Michael Scott’s Accountant says about price discounting Curtis A. Feldman, CPA 71 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 72. Modify/Change Operations Marketing and Sales Price Cuts • Have a firm grasp on your margins and how they affect your bottom line. • Avoid discounting and price wars. In the past, only 15% shop on price alone but more often are given the greatest attention. This percentage is higher now. Curtis A. Feldman, CPA 72 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 73. Modify/Change Operations Product/Service Offerings • Know what effect it will have on your bottom line and business strategy. A 10% cut for a business with a 30% gross profit, requires 50% more sales volume just to maintain your initial profit. Curtis A. Feldman, CPA 73 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 74. Effects Of Price Discounting Curtis A. Feldman, CPA 74 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 75. Revise Your Value Proposition Remember that business is PERSONAL…it is about people. Clients will value core services that meet basic needs, but they will value more deeply because you have satisfied a more personal and emotional need: the need to FEEL important. Curtis A. Feldman, CPA 75 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 76. Revise Your Value Proposition The Importance Of IMPORTANCE …much of life is too fast…as the world grows bigger every day, our desire to FEEL important grows into a NEED. THE CLIENT WHO FEELS IMPORANT FEELS LOYAL. Curtis A. Feldman, CPA 76 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 77. Rethinking Your Business Model • Find out what your customers really value. • Change your business model to match this new reality. e.g. mobile phones (old model, lock in customers with long-term contracts); (new model, buy cellular minutes as they are needed over their handsets, via the internet, through ATM’s or kiosks ) Curtis A. Feldman, CPA 77 © Shepherd & Goldstein LLP and RANONE April, 2009
  • 78. Customers Value • Make things interesting, easy and comfortable • Appreciate and reward loyal relationships • Provide real value, not just cheaper products • Go green; get inspired with innovative solutions to health, wellness, sustainability and less consumption Curtis A. Feldman, CPA 78 © Shepherd & Goldstein LLP and RANONE April, 2009
  • 79. Modify/Change Operations Marketing and Sales • Marketing expenses are often the first cost to be cut o Carefully review before slashing o Spend money to make money (still is true) o Sales follow the marketing o Don’t damage important customer relationships Curtis A. Feldman, CPA 79 © Shepherd & Goldstein LLP and RANONE April, 2009
  • 80. Modify/Change Operations • Learn from past history o McKinsey research of 1,000 companies during the 2001/2002 recession indicated Companies that increased spending on sales, marketing and innovation emerged in the top 25% after the recession ended. o They traded short-term profits for long-term gains. Curtis A. Feldman, CPA 80 © Shepherd & Goldstein LLP and RANONE April, 2009
  • 81. Modify/Change Operations Marketing and Sales ideas • Consider some less expensive marketing ideas o Reduce size of ads to run more often without increasing total cost o Introduce a referral program o Email and online marketing channels o Postcards vs. letters o Personal phone calls to let customers know of special offerings Curtis A. Feldman, CPA 81 © Shepherd & Goldstein LLP and RANONE April, 2009
  • 82. Call customers who have left you • Call and apologize • Ask why they left you (grass may not be greener) • Listen and repeat back what you heard • Ask for another chance-welcome them back • Offer a new/creative ways to service them o Creative financing o Pricing options Curtis A. Feldman, CPA 82 © Shepherd & Goldstein LLP and RANONE April, 2009
  • 83. Modify/Change Operations Systems and Processes Underlying support structure of your business that keeps all parts of your business running smoothly • Remove unneeded layers • Remove roadblocks • Consider centralization of different back-end functions • Use proven internet based systems and processes to eliminate internal development and associated costs Curtis A. Feldman, CPA 83 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 84. Modify/Change Operations Systems and Processes Underlying support structure of your business that keeps all parts of your business running smoothly • Meet with your team: o to brainstorm how you can bring greater value to your customers o to see how you can streamline your businesses internal processes by updating or changing systems Curtis A. Feldman, CPA 84 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 85. Modify/Change Operations Systems and Processes • Don’t scrimp on keeping your equipment, computer systems and programs up to date Curtis A. Feldman, CPA 85 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 86. Modify/Change Operations Fraud Alert For Small Businesses (WSJ 2/19/09) Curtis A. Feldman, CPA 86 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 87. Modify/Change Operations Fraud Alert For Small Businesses (one more thing to worry about) • Employee fraud rises in a recession • You may be vulnerable due to lax internal control procedures • Be aware of common signs: o Change in lifestyle (living beyond their means) o Controller/bookkeepers who “guard” access to the books. o Do not take vacations Curtis A. Feldman, CPA 87 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 88. Modify/Change Operations What should you do to help prevent fraud? • Have bank statement mailed to your house • Review every cancelled check, signature and endorsement on the back of the check and check payee • Look for unusual transfers • Make daily deposits • Do not allow financial employees to sign checks • review payroll reports yourself • review business credit card statements for legitimate charges • Approve all bad debt write offs • Safeguard your valuable assets (cash, inventory, equipment, etc) Curtis A. Feldman, CPA 88 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 89. Modify/Change Operations If you suspect something is wrong • Keep quiet • Hire an expert (S&G, lawyer) to help you investigate it • Contact police o Most employees are ashamed of what they’ve done and will agree to make a deal to avoid going to jail Curtis A. Feldman, CPA 89 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 90. Modify/Change Operations Team/Employees Your business cannot operate with out good people • Remind your self why you hired them in the first place. What has changed? • Communicate regularly with your team to avoid them jumping ship • They need to concentrate on your customer and your critical success factors for your new strategic plans, not worried about their jobs. Curtis A. Feldman, CPA 90 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 91. Modify/Change Operations Team/Employees But…People can often be your best asset! • Ensure that your best employees understand how their work contributes to your success • Discuss career advancement possibilities. Recessions can bring lots of change; roles may shift, and new career opportunities may open up. • Owners don’t realize that everybody internally is watching their every move. People are looking at you to provide leadership and instill confidence. Curtis A. Feldman, CPA 91 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 92. Modify/Change Operations Team/Employees 5 ways to keep employee morale HIGH 1. Spell it out for your employees 2. Ask your employees to be part of the solutions 3. Show them lots of empathy; face-to- face and with compassion. 4. Encourage employees to stay positive; discuss the employee’s options for the future and explain how you can help. 5. Create a culture that allows them to innovate and feel empowered; give them job value beyond a paycheck Curtis A. Feldman, CPA 92 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 93. Modify/Change Operations Team/Employees Strategies to reduce labor costs • Most obvious . . .layoffs • Salary freezes • Restructure compensation to offer performance bonuses or commissions • Reduce hours/job sharing • Time off without pay (i.e. Ford and Chrysler closed their plants for an extended period often around the 2008 holidays) • Hire interns (affordable source of energetic, smart labor) • Outsourcing Curtis A. Feldman, CPA 93 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 94. Massachusetts Workshare Program Program run by the MA Dept of Unemployment Assistance (formerly the DET) which offers: • Way to partially layoff employees during a slowdown • Allows a business to reduce staff ours as much as 60% • Pay team based on hours actually worked but also receive pro-rated unemployment checks (usually about ½ of what their wags for the same amount of time would have been) • Employees Do NOT have to file a client or report to an unemployment office to show they been looking for work • Unemployment checks delivered to your business and distribute with regular payroll Curtis A. Feldman, CPA 94 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 95. Modify/Change Operations Outsourcing, Outsourcing, Outsourcing • Consider recruiting motivating & retaining the “best in class” human capital through outsourcing. • Be very strategic about adding staff. Outsourcing offers many benefits: o Shorter time frame to implementation. o More cost-effective implementation. o Access to existing tools & solutions that have proven track records o Access to a more diverse base of skill sets & core competencies. o Reduction of investment in infrastructure expenditures. Through outsourcing, your business can gain ground on your competition who are “down-sizing”. Curtis A. Feldman, CPA 95 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 96. Modify/Change Operations Team/Employees - Pay Cuts Strapped U.S. Companies, while continuing to slash their work forces, are deploying a once-rare tool to trim labor costs. . . pay cuts. According to a recent Watson Wyatt Survey: • 5% of 117 companies surveyed said they reduced salaries to cope with the recession • Another 6% plan to do reduced salaries this year • 7% of 805 small businesses surveyed said they have recently reduced salaries The last time the U.S. had widespread wage cuts was during The Great Depression. Curtis A. Feldman, CPA 96 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 97. Modify/Change Operations Team/Employees - Who is cutting pay? • Advanced Micro Devises announced a temporary cut in pay between 5% - 20% • Caterpillar is cutting executive pay by 50% and many salaried employees by up to 15% • Hutchinson Technologies cut employee salaries by 5% for remaining employees • Trucking firm, YRC Worldwide, negotiated a 10% pay cut with union drivers as well as non union employees • Kulike & Soffa Industries instituted a 10% wage cut for salaried employees and 15%-20% cuts for executive salaries. The list goes on . . . Curtis A. Feldman, CPA 97 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 98. Modify/Change Operations Team/Employees - Pay Cuts The realty of this is most employees are not in a position to argue: • Fewer people are quitting their jobs (1.4% quit rate November 2008 vs. 1.8% a year earlier) • Companies are less worried about replacing their best workers because the labor supply is simply much higher • Prices are falling for U.S. Consumers (CPI up only 0.1% in 2008 vs. 4% in 2007) • Many employees would prefer pay cuts over a deeper round of layoffs Curtis A. Feldman, CPA 98 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 99. Cash Is King REVENUE IS VANITY; PROFIT IS SANITY; CASH IS KING Now more than ever, cash is king! • Monitor your cash position and requirements on a regular basis • Create cash • Preserve and maximize your cash Curtis A. Feldman, CPA 99 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 100. Cash Is King Know Where Your Cash Is • Install and use a cash flow monitoring system that tells you where your cash is, what you owe the banks and vendors, what is owed to you. • Cash flow forecasts should be updated weekly and your bank should be alerted to potential problems well ahead of time – they never liked surprises, now they like them even less. Curtis A. Feldman, CPA 100 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 101. Cash Is King The absolute priority is now cash over profits until things settle down and turn around Get paid for your products or services: • Review and tighten up credit policies (not everyone gets credit) • Require larger up front payments • C.O.D. • Use “friendly” phone calls to encourage timely payment • Stop work on slow payers (don’t get further behind) • Invoice accurately and timely • Collect payments personally from local customers • Charge interest on past due receivables Curtis A. Feldman, CPA 101 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 102. Cash Is King Other Ways to Create Cash • Consider drawing down unused lines of credit – banks may withdraw it if unused • Inventory that doesn’t turn should be converted into cash – even at a loss. • Identify redundant assets and sell them. • Markets may not be great for asset sales, but the name of the game today is CASH • Reduce 2009 tax estimates based on 2009 expected earnings Curtis A. Feldman, CPA 102 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 103. Cash Is King Most small business owners do not know what they are spending on. • Implement spending policies and controls (authority levels, who can order) • Review operating costs (i.e. power, telephone, travel, health care, etc.) • Review other discretionary spending (“perks”) • Spread out annual costs on a monthly basis (e.g. insurance premiums or maintenance contracts) • Change spending culture – you lead by example Curtis A. Feldman, CPA 103 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 104. Cash Is King Finance assets in stead of paying cash • Bank financing (not as easy) • Leasing • SBA enhanced financing available • WASHINGTON, March 10 /PRNewswire-USNewswire/ -- United States Senate Committee on Small Business and Entrepreneurship Chair Mary Landrieu, D-La., today praised the Senate for passing an Omnibus Appropriations Act that includes $546,626,000 for the Small Business Administration (SBA), providing a boost to the nation's 27 million small businesses. This is a $63 million increase from what President Bush originally requested and a $47 million increase from what was appropriated last year when disaster loan funding is excluded. • "Small businesses are our nation's number one job creators. With unemployment the highest it's been in a quarter century and 80 percent of jobs cut in the last four months being from small businesses, entrepreneurs are turning to the government for help," Sen. Landrieu said. "The Omnibus Appropriations Act will help create and save jobs by investing in small businesses and funding the programs they need to survive." 104 Curtis A. Feldman, CPA © Shepherd & Goldstein LLP and RANONE June, 2009
  • 105. Cash Is King Help For Small Businesses WASHINGTON (Reuters) – will announce steps on Monday (March 16, 2009) to make it easier for to borrow money, using $730 million in stimulus funds to cut lending fees, boost loan guarantees and expand other programs, officials said. • Obama and will announce a plan to increase federal guarantees under the SBA's most widely used loan program, an official said. • The current maximum guarantees are 85 percent of loans under $150,000 and up to 75 percent of larger loans. The guarantee will be raised to 90 percent with the aim of reducing risk and encouraging banks to make loans, the official said. • The administration also plans eliminate a number of borrower and lender fees on loans originated through its main loan program and a program to encourage long-term borrowing for major fixed assets like land and buildings. Curtis A. Feldman, CPA 105 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 106. New SBA program SBA's America's Recovery Capital (ARC) Loan Program can provide up to $35,000 in short-term relief for viable small businesses facing immediate financial hardship to help ride out the current uncertain economic times and return to profitability. Curtis A. Feldman, CPA 106 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 107. When All Else Fails-Insolvency • Close your doors without court assistance • Chapter 11 o Shields you from your creditors and discharges overwhelming debts o Retain control and hope to emerge to continue o Very expensive ($15,000-$25,000 legal fees) • Chapter 7 o Court trustee formally liquidates the business o Out of your hands Curtis A. Feldman, CPA 107 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 108. Navigating the Recession Business Financing Presented by Ed Nunes, Business Banker 108
  • 109. Evaluating lending requests The 5 C’s of Credit Capacity: Is the borrower capable of paying the new loan and current obligations? Collateral: What will be pledged to secure financing? Character: Measures the integrity of the borrower and past credit repayment history Conditions: Assesses the borrower’s industry and overall economic conditions Capital: Measures the relationship between debt and equity in the business. 109
  • 110. Business Scenarios Seeking Financing Existing Business: In business for 2 or more years with same ownership, Income verifiable with Federal Tax returns or Reviewed Financials. Nominal Start-up: Purchase of existing business operating at least 3 to 5 years and purchaser has 5 years of professional and management experience. True start-up: No clients, business in a new market, new marketing and business plan. 110
  • 111. Considerations for an existing business 2+ years of operations Historical and financial strengths of the business Value of existing business assets Management and professional experience 20% or > ownership interest would require personal guarantee 111
  • 112. Considerations for purchasing an existing business (Nominal Start-up) Prior financial performance Collateral review; intangible (client base) vs. tangible assets (physical fixed assets) Sources of secondary income Management and professional experience of purchaser 112
  • 113. Considerations of a true start-up (no existing patients) Business plan with 24 months of projections with assumptions The plan should be reviewed by a technical service provider such as Small Business Development Center or CPA Sources and uses of funds analysis Equity injection typically required (20%) • Note - 100% financing is usually not an option for conventional financing. Some specialized lending programs will offer 100% financing. Collateral Secondary sources of income Personal FICO score 113
  • 114. Financing Options Owner Private Financing Traditional bank programs SBA Guarantee Specialty Lender Vendor Financing Equipment Leasing 114
  • 115. Loan Products Term Loans Lines of Credit Business Home Equity Lines of Credit (SBHELOC) Commercial Real Estate Mortgages (CREMs) 115
  • 116. Term Loans PURPOSE: Purchase non-real estate fixed assets for either an existing business or a new business. FEATURES: Defined end-date on loan Fixed monthly payment: Payments based on principal and interest installments. Loan term should not exceed the “useful life” of asset 116
  • 117. Lines of Credit Short term working capital PRODUCT: Line of Credit PURPOSE: Rectify timing issues: (funding payables while waiting for receivables) Purchases of inventory 117
  • 118. Lines of Credit Short term working capital REQUIREMENTS: Usually paid down to zero annually Renewable BENEFITS: Flexible repayment schedule: interest-only options with flexible principal pay down Repayment coincides with peak in cash flow 118
  • 119. Business Home Equity Line of Credit Similar in nature to the Short Term Working Capital with the exception of collateral – being a primary residence. 119
  • 120. Commercial Mortgages (CREM) PURPOSE: To finance purchases or refinance commercial buildings or mixed use properties. FEATURES: Repayment terms include principal and interest Loan is secured by a mortgage on the real estate Rates are generally Fixed for 5 years, with the payment amortized over 20 years to keep the payments low 120
  • 121. Credit Guarantees and Enhancement S B A Enhancements – MOST FEES WAIVED (2009) Purpose: Used to reduce the risk of the loan and provides a reassurance to the lender by offering a guarantee Express Guarantee – 50% Patriot Express – 90% NEW Import Express – 90% NEW Community Express – 90% NEW 7(a) – 90% NEW TD #1 7(a) SBA Lender in MA 2008 121
  • 122. Credit Guarantees and Enhancement 504 Program Borrower puts down 10%, Bank finances 50% and SBA 40% 122
  • 123. Credit Guarantees and Enhancement ARC Stabilization Loan Program New loan program for SBA Applicants can start applying for the loan program 6/15/09 Loans will be made by participating commercial lenders 123
  • 124. Credit Guarantees and Enhancement ARC Stabilization Loan Program – General Info ARC loans can be made for up to $35,000 These loans can be used to pay up to six months worth of business debt Business debts include mortgages, non SBA loans, lines of credit and credit cards. These loans are interest free, no fees & have a 100% guaranty 124
  • 125. Credit Guarantees and Enhancement ARC Stabilization Loan Program Eligibility Designed for Viable Small Businesses – Start ups are not eligible The business must be in operation for at least the previous two years No debt can be more than 60 days past due Must have been profitable one of the past three years. 125
  • 126. Credit Guarantees and Enhancement ARC Application Requirements Must have financial statements for previous three years Must have projections that show profitability for two years after disbursement of loan proceeds Must show that your business is suffering an immediate financial hardship 126
  • 127. Credit Guarantees and Enhancement ARC – STAY TUNED More ARC loan information released June 8, 2009 For the most up to date information, visit http://www.sba.gov/recovery/arcloanprogram/inde x.html You can get more information at www.sba.gov 127
  • 128. Questions Ed Nunes Business Banker, AVP TD Bank, NA 74 Concord Street Framingham MA 01702 B (508) 424-7128 F (508) 620-3729 Edward.Nunes@TDBanknorth.com 128
  • 129. What About A “Do Nothing” Strategy? • If you’re cash rich, (and do nothing), you could be drained gradually and be bypassed by your competitors • If you’re cash poor, (and do nothing), you will eventually be forced to close down • A downturn can actually be good for a well-managed company. • A way for management to take advantage of this market opportunity is through taking the appropriate time NOW for strategic planning Curtis A. Feldman, CPA 129 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 130. 5 Things TO DO During A Recession 1. Do Something! 2. Be sure to do Enough 3. Encourage Referrals from other clients 4. Create a "WOW" Experience 5. Take Massive Action Now When you're a small business owner, there's no "Golden Parachutes", no Stock Options to cash in, and there are definitely no Government Bailouts coming your way. Success or failure of your business is on your shoulders! Curtis A. Feldman, CPA 130 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 131. How S&G Can Help Curtis A. Feldman, CPA 131 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 132. Build Strategic Contingency Planning Into Your Culture • What if your risk profile shifts dramatically? • What if demand suddenly falls off? • What if global events disrupt your supply chain? • What if prices drop precipitously? • What if this global recession lasts for more than a year? Scenario planning is a critical step toward a comprehensive contingency strategy; now is a good time as any to reconsider its use for today Curtis A. Feldman, CPA and tomorrow. 132 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 133. Strengthen The Bonds Of Loyalty • Pay special attention to your employees. Your efforts to support them will reap huge benefits for the company in the future —friends in a trying time often become friends for life. • Be a good vendor. Get close to your customers; unless you’re looking to exit a particular area of the business, now is not the time for trying short-term profit improvement strategies. The lesson: loyalty is not just the way out of a recession; it’s the way back to better-than-normal prosperity. Curtis A. Feldman, CPA 133 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 134. Watch Out & Act Quickly Immediate Action Required if you begin to experience any of these symptoms • Sales are slowing, and your profitability is declining. • Stock levels are increasing. • Pricing is too high for many of your customers. • You know that you have too many people for the work needed Curtis A. Feldman, CPA 134 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 135. Don’t Stop Growing • Get very aggressive while your competition pulls back, slashes it’s costs or is asleep at the switch. • Reduce extraneous expenses, but resist the temptation to slash your costs across the board, • Resist the urge to cut budgets in the areas of sales, marketing and business development. • Sound financial governance and implementing cost-containment measures is fine. BUT remember that cost cutting is not a business strategy. Curtis A. Feldman, CPA 135 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 136. Improve Communications • The frequency and the quality of both your internal and external communications needs to be at an all- time high. Err on the side of over communication. • The genesis of most business mistakes can be traced to poor communication, or worse yet, no communication at all. • While strong markets and bullish economies are forgiving of management errors, down economies are not. Make sure that all employees have a clear understanding of the mission and vision, and that all stakeholders are inside the communication loop. Curtis A. Feldman, CPA 136 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 137. In Conclusion • Change is necessary • Stabilize the Business • Value proposition and sales • Modify/Change operation o Inventory and vendors o Marketing and sales o Systems and processes o Team/employees • Cash is king or managing for cash • Communicate with your Banker Curtis A. Feldman, CPA 137 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 138. Conclusion And Closing Thoughts • The lack of astute, decisive, and proactive thinking and strategy can make it much more difficult to survive the challenges ahead. • If you wait and see how everything shakes out over the next few months…. this type of thinking is like driving a car toward a brick wall and watching it get closer and closer, yet doing nothing to turn or brake. • Our advice is simple. Don’t lose your focus or sense of urgency now that recovery is in sight. Let’s now discuss your ideas on how together we can make that a reality for you and your business. Curtis A. Feldman, CPA 138 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 139. Conclusion And Closing Thoughts • Any questions? • We would be pleased to assist you in your strategy development and implementation. • Please complete the seminar evaluation form before leaving. • Leave a business card for our free quarterly email Grow Your Business newsletter. Curtis A. Feldman, CPA 139 © Shepherd & Goldstein LLP and RANONE June, 2009
  • 140. Thank You ! ~ Curtis A. Feldman, CPA ~ Ed Nunes Sponsored By: