EXECUTIVE INSIGHTS: JIM ZAWACKI

BRAVE NEW WORLD
It doesn't help to know that our country's problems started with poor credit policies, followed by foreclosures in 2007, rapid rises in fuel costs and raw materials through the first three quarters of 2008, and the collapse of the automotive market during the last six months. We've entered a Brave New World where the economic rules of the 20th century (at least through 1992) don't apply today.

When a recession happened and jobs disappeared in the past, everyone understood the economy would grow better over time and the jobs would return. Not today. With globalization, too many jobs are gone and not coming back.

Most experts forecast that this recession will last 18-24 months or longer, but too many economic forecasts still look into a rear-view mirror that is now broken. The real future requires navigating uncharted waters inhabited by too many suppliers trying to grab piece of a shrinking market by lowering their prices to close new jobs that ten other suppliers also need.

How can one survive an environment where credit availability, foreclosures, depressed industries, and consumer confidence changes daily? Topping all of this are concerns about whether your own bank will survive. Even if your bank is fiscally sound, they may not want to be in your market segment! The cost of money is going up and you may need to find a new bank at a time when banks don't really want to make loans.

Have we hit bottom? No, it will get worst. For example, our company serves the automotive, electronic, and office furniture markets – all slumping due to consumer confidence. Even niche markets are experiencing lower volumes. The future does not look bright. Hopefully this will not decline into a depression like the automotive market has entered.

One thing is certain. When this recession is over, there will be fewer suppliers – a lot fewer suppliers. So the question is this: Will you weather this storm or be one of the casualties?

ORDER IN THE HOUSE
Don't wait until it is too late. Make sure your house is in order. Have good communications with your employees, customers, and banker. And manage your cash like you never have before.

Employees. Your employees deserve to know the good and the bad news, being as realistic as possible. Keep them informed so they are not second guessing what is happening within the company.

Customers. Most customers today want to know the financial status of their supply base. This is more critical today than ever before, because many bankruptcies will occur in large, medium, and small companies during the near future. Work with your accountant to supply your customers with the financial information necessary to convey confidence. If your financials are poor, then prepare your customers with the best alternatives available. You may need to find a new partner or a strategic alliance to make your customers feel better about your financials.

Banker. Make sure you are not violating any bank covenants. Before falling close to financial trouble, meet with your banker. Hopefully you have already established a close relationship that keeps your banker informed about your business. Realize that bank financing is going up no matter how good your current financial position may be.

Obviously, look at all means to control your cost and manage your cash to financially help your business survive. If you have communicated effectively with your employees, they will understand and help contribute to controlling costs. Let your banker know the cost and cash items you are controlling to help the bottom line. Jobs and cash are kings today.

THE BEST OUTSIDE THE BOX
Controlling cost and managing cash helps, but you must also try to increase market share to improve your financial position. Entering new market segments, such as military and medical sectors, is another means of increasing your sales. Innovation in product development, processes, or other ways of doing business may offer you a competitive advantage.

These are times that none of us has ever experienced. No one can predict when or how this will be resolved. When the market improves, your company can have the right customer base, the right banker, and employees that supported your moves.

The goal is to move past survival by becoming "the best at what you do" while thinking and operating "outside the box." For marginal companies, the options will be liquidation, bankruptcy, or just going out of business.

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