Combating the Challenged Economy – Survival Strategies

By Eugene Valdez

As a commercial banker, specializing in loaning money to privately owned entrepreneurial firms, I interact with hundreds of CEOs in any given year, be they prospects or customers. Some of these firms are doing very well despite the economy, some are just “treading water,” and others are doing very poorly.

As a close observer of those CEOs that are doing well, I have noticed that there are some common surviving and thriving strategies (S&T) shared amongst them. Here are a few that stand out:

Fanatical management of cash. Cash and cash flow is a scarce resource today as more and more customers are stretching out the number of days they take to pay their invoices. The S&T firms that I have seen are fanatical with management of their cash. They are constantly preparing cash budgets to forecast their cash positions. They negotiate with their vendors aggressively for extended terms and develop ways to speed up the pace in which their customers pay them. Many are utilizing technology such as Remote Deposit Capture (RDC) and Automated Clearing House (ACH) to accelerate cash flow.

Show your customers you love them. It seems like an obvious tactic, but the S&T firms I have dealt with take customer appreciation and service to a higher level. Their goal is not to meet customer expectations, but to exceed them consistently, which helps them achieve higher customer retention rates than their competitors. Many of these companies develop creative ways to show customers how much they value their business.

Trim the fat. My sample of S&T firms critically analyze all of their business operating costs and are not hesitant to radically reduce expenses when it needs to be done. It is painful for an entrepreneur to layoff loyal employees, cut hours, freeze salaries (including their own), reduce benefits or eliminate the company holiday party. But despite the pain, they were willing to take one step backward to move two steps forward and do what is best to sustain the business.

Maintaining a consistent positive attitude. The psychological aspects of managing a small entrepreneurial company are often underestimated in my opinion. The CEOs of my S&T firms always maintain a positive attitude with their customers, vendors, and employees no matter what setbacks their company experiences. These CEOs realize that their thoughts and words can inspire and create an aura of positive energy among all of the audiences they come in contact with. They are very much aware that their employees are watching how they behave in the face of adversity.

Develop a good relationship with your banker. If you have an existing credit line with your bank, be thankful and strive to develop a strong relationship with your banker by proactively keeping them informed about company news, be it good or bad. If you don’t have a credit line in place, try to obtain one even if you don’t think you need one. Having access to “emergency cash” is very important to protecting your business from unforeseen events that could negatively impact your company’s normal patterns of cash flow.

Eugene E. Valdez is the senior vice president and regional manager for Pacific Mercantile Bank’s Inland Empire Financial Center located in Ontario. Valdez can be reached at 909-937-7275 or gene.valdez@pmbank.com. Opinions expressed in this article are those of the author and not those of Pacific Mercantile Bank.