In Minor's League: April 2001

ANSWER: This is a situation that seems to be developing for many business owners at this time. The stock market is in "bear country," which triggers a slowdown in the economy, and hence spending for many of the services landscape professionals provide.

In general, a key at this point is not to overextend your payroll capacity or create burdens that cannot be met during a recession. Too many contractors think that the next job is right around the corner and don’t concern themselves with overextending capacities. However, overextending often causes contractors to bid jobs below a profitable level just to meet the fixed expenses they created for their businesses.

Before you get into this situation, examine your personnel issues. Often, during an economic downturn you will be better served using temporary labor instead of hiring full-time staff in certain situations. The obvious benefit here is reducing fixed costs and retaining flexibility in tough times.

Instead of increasing salaries, consider more incentive compensation. Try your best not to cut people, especially key employees. You will be better served by reducing benefits, overtime or unnecessary perks than by eliminating people you will eventually need again. Freeze those salaries before you are forced to fire good, dependable staff. If you do have to eliminate staff, make sure they are the non-essential, expendable employees.

During challenging periods like this, you, as the leader of the organization, need to manage your associates’ expectations and make sure you are realistic with your own goals. Communication is the key. Meet regularly with your staff to talk about the current situation and brainstorm to develop strategies that will help you through the difficult times. Working together to solve problems creates buy in and enhanced loyalty.

At the same time, the basic business management that you took for granted during the good times becomes increasingly important. Control your inventory and make sure your managers only order absolute necessities. Capital expenditures that once were commonplace should be closely scrutinized as well. Forego unnecessary purchases.

From a financial perspective, I highly encourage zero-based budgeting. Ask yourself this question: "If I started this business today, would I spend this money?" If you answer, "No," don’t budget for that purchase now. Question everything in your budget from A to Z this way. Expense accounts, country club dues, car expenses and travel are just a few examples of expenses that seem to get out of control during the good times.

Finally, receiving timely financial information so you can adjust and make the needed changes is of the utmost importance. If you are not receiving your monthly financials by the 10th of the following month, then you simply are not getting them soon enough. Weekly reports detailing your payables, receivables and sales prospects - just to name a few line items - are also important to monitor.

The bottom line is, you have to become a better manager when the economy slows down. Those who pay attention to the smallest details will survive. Those who don’t will have tough tasks ahead of them.