Cut costs in search of cash

In 1990 I took over the management of a company taken out of receivership by some investors. I won’t bore you with the reasons they bought it, or why they put me in or even why I did it. The lessons learned are more interesting.

I was asked what I planned to do on my first day in the job. To be frank, I had no idea. I had never thought about it. Fortunately this was not a problem. The challenges came at me in waves as did the lessons to be learned.

The problems coming at you when times get tough fill your time, leaving you with no time to think. The result in my case was that it quicly became clear that if I did not make immediate and drastic changes the receivership experience would repeat itself. My room to manoeuvre was not helped by the deep recession we were in – not unlike where we are today.

I learned quickly what had caused the company to go into receivership in the first place and that I had to address those issues much more quickly and ruthlessly. Getting more cash from anywhere was out of the question, revenue was down with the recession in full swing, so there was only one place to go – slash costs to the bone. Well there went my popularity!

Since that time I have managed several other companies with similar challenges and talked with companies heading in that direction. Inevitably the executive will say that the company’s problems would be completely resolved if it got some cash. Well going out for cash, when you are desperate, in a credit crunch is a time consuming and fruitless proposition.

The challenge is to stand back, look what is happening and stop the costs. And that should include your Beemer. The company is not generating sufficient cash to cover the costs – it is that simple. If the customer is king, cash is holy. So if the revenue is not sufficient to generate the cash, costs must be cut – ruthlessly. This is painful, for the executive, the staff, the suppliers, the landlords. And it requires a culture change in the company as well as drastic and quick action.

I will join the Enterprise Britain bloggers and address some of these issues over the coming weeks and months, sharing my experiences in a range of companies covering transport, environment, technology and services. The solution to your cash problems have to start at home, not at the bank. We all know they will not help you.

And if I can help just one member of Enterprise Britain survive in this cashless world, then I will have achieved another small victory.

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