Technique 3 - Cell phones
In a turnaround, cell phones are a luxury that a
business cannot afford. Many of these bills run $500 to $1000 monthly
and are this high because of personal phone calls. Get rid of all cell
phones even if it means paying cancellation fees. A landline is
If you feel that your business cannot survive without
mobile phones then put in place a use policy. This policy should
plainly cover to whom, when and why an employee places a call on his
or her cell phone. Of course, you must check these bills regularly and
Technique 4 - Company airplane
If you have a company airplane (even a small prop), you
must get rid of it. You do not need this luxury, and it can be a ready
source of cash.
airplane, you send a strong signal to the employees, as
well as your lenders and investors that you have committed fully to
the company's turnaround. You show them that you are willing to make
personal sacrifices to ensure your firm's survival.
Technique 5 - Company cars
Effective immediately, cut out company cars including
your own. Like the airplane, this is another unnecessary luxury. You
may have to keep the cars for your sales team, but, if they can drive
their own cars, it will save you a bundle.
Technique 6 - Company credit cards
The only person that needs a company credit card is
you. If others in the firm have a company card, you need to gather
these immediately. You
will do this for three reasons. First, a company credit card allows
employees to make purchases without your approval. This does not
follow your new buying procedure. Second,
disgruntled employees will often charge personal expenses on the card
before quitting. Third, you will force all employees to put travel and
related expenses on their own credit cards. As a result, they will be
more frugal in their choices.
Technique 7 - Computers and software
My experience is that you can get by for at least a
year without upgrading your computers and software. This should is
especially true after a layoff when you should have extra computers
laying around. Cut this line from your capital and expense budgets.
Technique 8 - Consultants
In most companies, you pay consultants around two to
three times your average employee cost. Therefore, other than your
turnaround consultant or coach, you should release all your
consultants immediately. Your new philosophy should be if you cannot
do it in-house, then you should not be doing it right now.
Technique 9 - Discounts from suppliers
Use any advantage that you have to get supplier
discounts. You may want to couple this effort with a search for better
payment terms and higher credit limits. Potential leverage points are
increasing order size, moving to another supplier, or a sole supplier
arrangement. Eventually, you may have to tell your supplier that you
need a discount for your business to survive. Do not play this card
until you have exhausted every other cash saving opportunity because
your supplier can always just cut you off.
Technique 10 - Insurance
Cancel any unnecessary insurance that you may have.
Unless your loan agreement requires it, you can get rid of "key
person" life insurance coverage. After layoffs, your company should
substantially contract in size. Therefore, your property and employee
coverage should decrease as well and you should ask for discounts in
these premiums. In addition, you should bid out your insurance
(including your employee health insurance) at least once a year to get
the best rate possible. You can see a ten to 25 percent drop if you
have not bid out your coverage recently.
Technique 11 - Lease or rent renegotiation
If you are in trouble, many of your landlord's tenants
likely face similar issues. This can be a good time to renegotiate
with your landlord. He or she does not want empty space on his or her
hands, and will work with you on your rent Dealing with your landlord
is a lot like dealing with your banker.
Technique 12 - Leasing
Leasing can be a great financing source for your
troubled business. You should follow one simple rule. If you need an
expensive item for your business, you will only lease it and never buy
it. Using this rule, you will save at least two thirds of the cash
outlay for capital goods in the first year. This is a good savings.
Technique 13 - Legal services
Monthly legal bills can easily amount to several
thousands of dollars even in small companies. For a profitable
company, this is reasonable as a lawyer's advice gives a sense of
security on a business decisions. However, this security is something
you cannot afford during a turnaround. Although you still will need
legal services, only use your lawyer in critical circumstances. For
example, get your lawyer involved when a plaintiff files a lawsuit
against the company or when you have personal liability issues.
Further, your lawyer can help you collect money from deadbeat
Understand the message here. Having a good attorney is
important during a turnaround. However, to prevent the high costs,
limit your legal services to those areas important to your company's
survival. This means that sometimes you may have to go ahead without
your attorney's oversight You may want to buy a legal handbook for
businesses to help you decide. Most cost less than $50 and give
standard contracts and legal watch outs.
Technique 14 - Marketing materials
Get rid of all novelty items such as the pens, the
notepads and the calendars. Also, cut out marketing materials that
have never worked and are no longer relevant. Get rid of the expensive
stationery and business cards. Only print more of those pieces
necessary to communicate your sales message.
Technique 15 - Memberships
My personal belief is that all memberships are a waste
of time and money. You should cancel all of these immediately. If your
employees want to keep memberships, they should pay for them out of
their own pockets. The enduring argument against cutting these
`Valuable" memberships is that they help develop professional contacts
and these contacts eventually translate into business sales. Even if
this is the case, you do not have time right now to cultivate these
new relationships into sales.
Without cutting costs, there is a good chance you will
be out of business before these contacts amount to anything. If your
sales team is any good, they do not need a membership to a
professional organization to find sales leads. If you disagree with me
on this, then limit memberships to one employee to an organization.
The employee who holds this membership should be your best
Technique 16 -
No more flying first-class! If anyone in your company
travels (including you), he or she must fly coach or take his or her
own car. There should be no exceptions to this rule.
Technique 17 - Other expense items
Review a detailed
profit and loss statement for your company. Are there expense items
you can cut without affecting your revenues in the near term? One
example is training. Do not provide any extra training now, unless it
leads to an immediate increase in sales. Otherwise, you slash this
Technique 18 - Overnight delivery
Cut out this budget
item except for rare instances when you must send a client a proposal
overnight Another time to use overnight delivery is when the customer
pays for it as part of his order. Otherwise, use regular postal mail.
This will save you a bundle.
Technique 19 - Pay cuts
Pay cuts, especially among the senior team, can be a
great source of savings for the company. Each senior team member needs
to agree to cutting his or her salary. In return, offer extra stock
options or future raises when the company has achieved its turnaround
If a team member does not agree to the pay cut, then
you should fire him or her. Others who give up pay will resent the
member who refused the pay cut. This will destroy your senior team's
capacity to cooperate. If you are in trouble and have no other savings
opportunities, you can set up a similar program with the
rank-and-file. However, prepare for your top performers to leave you
immediately and for overall morale to deadline.
Technique 20 -
Like charitable contributions, political contributions
and lobbyist costs must go. Business gains from
these expenses are strictly long-term, and right now, you must focus
on your company's short-term survival. If you still
give, do it out of your own pocket and not out of the
Technique 21 - Reduction in force (RIF)
Reduction in force, or layoffs, are usually the
quickest and the most effective way to lower your costs. However,
layoffs are the most emotionally draining cost cut that you will make.
Technique 22 - Sublease
After most layoffs and pare-downs of the business, you
will have extra space you no longer need. However, a lease commitment
may prevent you from getting rid of it
Explore subleasing this space. This is especially
effective if your current lease is well below market rates. Before you
do this, check your lease to see if it allows subleasing. If not, then
your landlord will likely take the space back from you if you
currently have a sweetheart deal. Therefore, you win either way.
What if your current lease rate is well above the
current market prices? If you cannot give back the space to your
landlord in a lease renegotiation, then you should sublease the space
forasmuch as you can get Getting something is always better than
Technique 23 - Subscriptions
Get rid of all subscriptions. Often you are paying for
several copies of the same publication and, frankly, no one is reading
these unless they are going to the bathroom. If someone wants bathroom
reading, let him pay for it out of his own pocket
Technique 24 - Support services
Cut out support services for customers that slow pay or
don't pay. If you provide customer service to these people, you are
throwing good money after bad.
After cutting support services to nonpaying customers,
examine your overall support services. Many failing companies provide
too many services to their customers free. This is usually in the name
of "great customer service." Either customers seldom use many of these
services or customers just do not value them.
Therefore, only provide minimum support services in
line with your competitive environment and have
customers pay for premium services. This then helps you in two ways.
First, it reduces your costs. Second, it provides you with a new
stream of income.
Technique 25 - Telephone
With fierce competition in both local and long-distance
markets, prices for phone services decrease daily. You should make
sure that you are getting the best rate out there today. Just call
around. You will probably see at least a 10% discount if not
substantially more with just a few hours of work. Besides finding a
better rate, you should study your most recent bills to find more
money. What you find will surprise you. Often, the phone company is
charging you for phone connections you abandoned long ago or your
employees are making many unnecessary long-distance calls. Your phone
bill is one of the biggest sinkholes at your company. Stay on top of
it regularly, and make sure you are only paying for those services
that you need.
Technique 26 - Travel
Travel usually is one of the largest expense items in
your budget Therefore, you must get it under control quickly. Until
your have made all of your expense cuts and have your house in order,
you should put a moratorium on travel. The only exception to this rule
is if someone needs to visit a customer to get an important sale or
preserve an important partnership. Any employee who wants to travel
should get your personal approval, and they should give you an
estimate of their trip expenses. Only approve travel that is necessary
to bring in revenue.
Technique 27- Price increases
Many companies never touch their pricing unless their
costs change dramatically. This method is just flat wrong. You should
price your goods and services at market rate.
Therefore, look at your prices, and see where you are
under pricing. In these areas, raise your prices immediately to market
rate. You likely will see little change in sales volume, and a
dramatic increase in profits and cash.
If losing sales volume on these "loss leaders" concerns
you, then compromise with me. Only raise your prices by half of the
difference with the going price.
Technique 28 - New markets
Selling a product into a new market can be a quick
boost for your sales if you have ready and willing partner to help
you. If someone has approached you offering to sell your product into
a new region or a new market niche, then you do not have much to lose
right now. This could be a great new source of revenue and income.
Technique 29 - Excess equipment
Look around your plant and offices and identify any
excess equipment You probably have some. Convert this to cash as soon
as you can. If you have much equipment to sell, then consider using an
auction firm. They can easily carry out the sale in just a few months.
Also, check to see if there is a ready market on eBay for your
equipment I am seeing more and more companies liquidate equipment and
inventory on eBay.
Technique 30 - Excess inventory
Like old equipment, you should sell any out-of-date and
excess inventory. You will get your best price by selling it to your
customers. If that does not work, then use a liquidator or sell the
inventory in an auction possibly with your excess equipment
Technique 31 - Sale and leaseback
If you own large equipment or business property
outright, cash out your equity position. This will give you
some much-needed breathing room. Consider using a sale and leaseback
arrangement In this transaction, you sell your property to a leasing
company or real estate investor and then sign a lease with monthly
payments for continued use of the property. Contact a leasing company
or a commercial real estate broker to make this happen.
Technique 32 - Advance payments on orders
Try to get an advanced payment on orders, especially large orders. A
typical number is 50%. This advance will give you working capital to
complete the order and increase your bank balance. You could encourage
your customer to give you the advanced payment using a discount on the
Technique 33 - Collection agencies
If you have written off receivables, consider getting a collection
agency involved. Although you must give them 20 to 50% of the invoice
amount, a collection agency can easily yield unexpected money for your
firm. In my experience, every customer paid his or her overdue invoice
within two months after I hired a collection agency. Many
businesspeople do not like using collection agencies because they fear
it will damage their partnership with their customer. However, you
need to increase your short-term cash flow right now, so don't worry
about long-term implications until later. Also, keep in mind that
usually you will not be doing future business with this deadbeat
Technique 34 - Collection procedures
Do not be shy about requiring your customer to pay on
time. If you quietly and patiently wait, you probably will be last on
your customer's payment list Sometimes, he or she will not pay you at
Therefore, either you or your collections person must give your
customer's payables department a friendly reminder call a few days
before your invoice is due. Then, if they do not send payment, call
every few days until they pay. Step up your customer's chain of
command if necessary. Using these procedures, you will have few
invoices going 15 days past due. This is stellar receivables
Technique 35 - Receivables factoring
Factoring is a great way to finance a turnaround. You
can get money out of your outstanding receivables in about two weeks
from the time you enter the arrangement After you have set up the
partnership with the factor, you can sell him or her any new invoice
and receive payment within 24 to 48 hours.
Technique 36 - Debt forgiveness (for long-term COD commitments)
If you cannot pay your supplier debts but you need to
continue supply of the parts or service, you may be
able to negotiate outright debt forgiveness in return for a long-term
buying commitment Of course, since you have burned your vendor, he or
she will want payment immediately or cash on delivery (COD) on the
future purchases. You will need to treat your vendor much like your
banker. You show your plan and timings for getting your business back
on track. If you think your vendor will go for the deal and you have
the cash to do COD, then this may make sense.
Technique 37 - File a tax return
Since your business is in trouble, you have likely
lost money over the past few quarters. The good news is the Federal
Government will rebate some of the money that you paid in past years
because you are losing money today. Accountants call this "a loss
carry back" and your CPA can file a return right away to get this
money to you in a few months. Contact your tax CPA for details on
how to get this refund.