Retail Insight
Recession survival guide for businesses
By Patrick Astre
One would think there wouldn't be a need for recession planning. We should see them coming. The constant sine wave of business cycles makes recessions as inevitable as surging booms. Of course, if you put 10 economists in one room, we'll get 11 opinions, so the exact timing of recessions is darn near impossible to predict. Still, like hurricanes, recessions come along once in a while, and occasionally one will wreak havoc on the shoreline.
One of the great business models that can teach how to weather recessions is seasonal retailers. For instance, there's a small business around the corner that sells swimming pools and backyard leisure items in the summer. Yet, when seasons change their business needs, you can bet the farm that their display changes to snow blowers, wood stoves and chainsaws in September, and Christmas trees in December.
Recessions come as regularly as seasons, just not as often. Businesses and consumers alike should be prepared for them just as they prepare for winter. So here's a guide for businesses to handle recessions and the inevitable boom that follows.
Recognizing the basics and actually implementing a plan can be two different things. Here's how to start: Understand the financial ebb and flow of your business. You should be using a computerized accounting system. QuickBooks is the premier system right now. If you have an accountant, they're probably using it. (If you're using an old paper system and doing your own bookkeeping, your first task is to change immediately. Buy the software and take a course in using it. They are available online, as well as various classroom settings).
Your primary tools are found in the company financials, sales and customers sections. You will use three primary QuickBooks' tools:
1. Profit & Loss Statements
The program will allow you to see all your expenses and income - categorized - and tell you if you've made a profit or suffered a loss during that time period. Run the P&L as far back as you can, five or 10 years if possible. Do it for each quarter and annually. You will be able to tell what period of time is most profitable, when expenses rise, what the expenses are, when income increases, and in what categories.
2. Representatives
If you have a sales force, the Sales section of QuickBooks shows sales details by individual reps. This will tell you who's doing the best job and who needs improvement.
3. Customers and invoices
The Customers & Receivables section of QuickBooks will show you open invoices and accounts receivables aging details. Now you will know how long it takes you to get paid and how many outstanding invoices there are for each period. This is crucial since the amount of time it takes you to collect has a direct impact on your cash flow.
Once you have this information at your fingertips, you're ready to begin recession-proofing your business.
Cut expenses
Actually, a wise businessperson should be doing this all the time. The trick is not to be like the butcher who backed into his meat grinder and got a little behind in his work. Trim only the fat, and beware of cutting things that bring in revenue.
The first step is to scrutinize the expenses part of your P & L statement. Take steps to reduce obvious expenses that can be lowered. Energy costs through efficient windows or insulation, superfluous purchases, eliminating inventory or services that aren't profitable, that's the obvious. The rest is more difficult, especially in these areas:
Advertising
Be very careful to differentiate between crucial advertising that brings in business and that which doesn't. Ask customers how they heard of you. Offer coupons that must be brought in so you know the source of the customer. Record the answers and use it to manage your advertising budget.
Employees
This is another tough row to hoe. Laying off people is the kind of thing that makes you wish you hadn't gone into business. Examine closely the functions of each employee. In a recession you may be forced to retain only key employees. Be ready, have the decisions made ahead of time and hope the day never happens. Prepare yourself to carry it out if the time comes.
Watch your cash flow in good times.
Business is good, money pours in, why get crazy, right? So collections are behind and expenses are too high, profits are still good, so why bother? The preceding words are the main reasons why businesses fail during recessions. There are many dangers of financial complacency, and when economic slowdowns occur the business is blindsided.
Collections are abominably slow, expenses are high, and it's a scramble to get rid of bad habits developed during economic booms. Pretty soon the "Going out of Business" sign appears on the door. Straighten it all out during the good times, just when you think you don't need to - because you really, really do need to.
Set up an emergency fund.
This is crucial. If you do nothing else, at least do this. Start putting 10 percent of gross in a ready, liquid fund tied to your business. Use a good steady bond fund like Vanguard Intermediate-Term Tax Free Municipal Fund, or ING Direct. Make believe this is another expense, and it is - it's an expense that might save your business some day.
Keep going until you have at least six months worth of your business' gross income. In addition, have a ready source of credit in case a deep recession comes along and you need more cash. Be a miser with your expenses and a hog with your savings. Put it away till it hurts. It'll pull your bacon out of the fire in a recession.
There you have it, folks - a basic, commonsense guide to recession-proofing your business. In reality, doing this will improve every aspect of the business and boost your bottom line. It's just like the guy who painfully banged his head against a wall. When he was asked why he does this, he replied, "Because it feels good when I stop."
It will feel good when you get this done, and you'll sail through the next recession with a smile.
About the Author:
Patrick Astre - certified financial planner, enrolled agent, registered financial consultant - is an author, speaker and a recognized tax and financial expert specializing on the economic issues of longevity. As the founder of Astre Planning Inc., Patrick has been advising individuals, small businesses and corporations for nearly 40 years. Some of his clients include ING Direct, Princess Cruises and Emerald Passport International. He is the author of, "This is Not Your Parents' Retirement," (Entrepreneur Media Publishing) as well as "Educated Investing and the Four Seasons of Money." For more information, contact Patrick at (631) 744-9100 or visit www.ProsperousBoomer.com.
Symposium offers advice on food safety, staffing
By Fred Wilkinson, The Packer
Food safety, staffing considerations and locally grown produce dominated the discussion at the May 16 foodservice symposium during the Canadian Produce Marketing Association's convention and exposition May 14-16 in Calgary, Alberta.
Carl Svangtun, executive vice president and chief executive officer of Sun Rich Fresh Foods Inc., Richmond, British Columbia, moderated the event.
Food safety
Operators can expect increased focus on food safety from the public and government, says Claudia Owens, director of purchasing for Earls Restaurants, Vancouver, British Columbia.
She advises foodservice operations look for growers that use good agricultural practices and processors that test water for E. coli.
Owens says Earls uses its online Earls University to show employees about food safety.
Working with health officials can alert restaurants to potential problems, says panelist Craig Davies, director of purchasing for the casual steakhouse chain Keg Restaurants, Vancouver.
"The health inspector can be your best ally," he says.
Davies suggests using suppliers who supply large accounts that will have their own safety regimens in place as a way to add assurance product is sourced from a well-maintained, well-operated facility.
"Use suppliers who others visit weekly," he says.
Davies mentioned the importance of considering the front-end staff in the food safety chain, urging hand washing and use of hand sanitizer to fight the spread of germs.
In the event of a product recall, assume the worst, Davies says, and take the product off the menu.
"You can always back off," he says, adding that having a written recall protocol set up is vital to policing product safety.
Staffing issues
Panelist Mark Klaudt, owner of Route 40 Soup Co., Turner Valley, says competing for workers is fierce in Alberta, where high-paying jobs in the oil industry make attracting and retaining workers a challenge.
In addition to competitive wages, meeting employee needs through keeping in mind their lifestyles and career goals must be considered.
Panelists cite keeping in touch with workers via the Internet as part of an effective communications strategy.
At Keg, facebook.com is used to allow staffers to check scheduling and trade shifts, Davies says.
Restaurant often employ a young staff, and reaching today's computer-savvy young adults requires adapting to new technology and methods of communication to engender skills.
"Just handing them the manual doesn't work," Davies says.
Local focus
Klaudt said he searches farmers markets for produce to use at Route 40 Soup Co., where the offerings include quart jars of soups to go, catering and providing soup for sale at the Millarville Farmers Market.
Earls also makes efforts to align with local growers, Owens says.
Earls — with 50 casual-dining restaurants throughout western Canada, Arizona and Colorado — also is into organic, though because of Canadian Food Inspection Agency regulations the menu doesn't play it up, Owens says.
She named spring mix and fresh herbs among the organic produce the chain employs.
Top menu trends: 'Freshness, flavor and health'
By Jody Shee, The Packer
Restaurants that don't highlight freshness, flavor and healthfulness on the menu probably won't thrive for very long.
That's the word from Nancy Kruse, president of The Kruse Co., Atlanta, a menu trends specialist who spoke at the May 19 workshop session, "Focus on the Future: Turning Up the Heat on Your Menu" at the National Restaurant Association's 2008 Restaurant, Hotel-Motel Show in Chicago.
The three trends put produce in a very good light, and in fact, "There may be a produce renaissance. I think side dishes will take on a whole new life as we move through the seasons," she says.
Freshness
A survey of chefs a few years ago revealed that chefs overwhelmingly believe that freshness is the No. 1 menu trend. In a follow-up survey that asked why, the chefs said that freshness connotes better taste with a healthy and value perception.
The mention of a fresh seasonal produce item in the name of a dish helps convey freshness. For example, Kruse notes Mimis Café's citrus-broiled shrimp springtime special with fresh asparagus and strawberries and Panera Bread's tomato and fresh mozzarella salad with fresh basil.
Flavor
The fresh basil also fits in with the second trend, flavor, which Kruse says will remain as long as we're around.
Pointing out TGI Friday's crispy green bean fries with wasabi-cucumber sauce, Kruse says that there's been a revival with cucumbers for the cooling sense it gives. With wasabi as the No. 1 fastest growing condiment, the pairing of its hotness with the cooling quality of cucumbers demonstrates a juxtaposition that is a flavor opportunity for other restaurants.
Among ethnic flavors, Asian is the hottest trend that Kruse expects to continue. Though Mexican food is popular, and is almost a menu staple, Asian cuisine is the fastest growing ethnic category, she believes because it is less familiar and broader in regional types, such as Chinese, Japanese and Thai.
Healthfulness
With health as the third menu driver, Kruse suggests that restaurants add some of the popular superfoods to dishes. A few of those superfoods known for their nutrition benefits are blueberries, pomegranates, broccoli, oranges, spinach and tomatoes. She highlighted Uno Chicago Grill's watermelon and blueberry salad.
With beverages as the fastest growing menu category in 2007, adding those superfoods to the beverage lineup also makes sense. For example, Kruse highlighted Bugaboo Creek Steak House's wild Maine blueberry lemonade; TGI Friday's fresh margaritas (blueberry-mango margarita, raspberry-cherry margarita and tropical passion margarita with guava and mango); and Maggie Moo's raspberry-pomegranate smoothie.
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