These could charitably be called uncertain times. Among those feeling the heat of the financial meltdown are Washington, DC area companies that face the tricky task of balancing their existing customer base with business development. So, how can companies weather the financial storm and still see their businesses grow? For answers, we went straight to Ted Leonsis, vice chairman emeritus of AOL. Leonsis offers a six-point plan that “” by his estimation “” every CEO at every company needs to put in place right now. Here“™s a rundown:
- Forget the long-term and focus on the next 18 months. “Too many business plans have growth coming in Year 2, Year 3 “¦ and that“™s when you get the cash flow profitability for start-ups “” all those plans have to be thrown out the window with a focus on cash-flow profitability now being central to any business case,“ says Leonsis, adding, “Growth for growth“™s sake is no longer in fashion.“
- Cash is now king. Those companies that have cash not only will be able to weather through current credit issues, they“™ll also be able to consolidate companies that are less solvent than they are. “So, I think you“™ll see some real opportunities where cash-rich companies will be able to buy and merge with great companies that just didn“™t get financed or for whatever reason didn“™t have the wherewithal to raise money at the time it was needed,“ says Leonsis.
- Double-down and focus on your existing customer relationships. It“™s expensive to get a new customer “” and your most profitable customers are your existing ones. “Getting into deeper, more profitable relationships with your existing base “” and hunkering down with them “” is a wise course of action,“ says Leonsis.
- Raise monies today “” and keep your pride in check. “There“™s money to be had, it“™s just that the terms are much more onerous “” entrepreneurs will have to keep their pride in check and not worry about valuations,“ says Leonsis. “Right now many funds and most individuals“™ portfolios are down significantly and it would be naive to think that valuations of many companies haven“™t been affected right now,“ he adds. So, Leonsis“™s advice: take the money and don“™t worry about the valuation.
- Look at your business with a third-party critical eye. Look at what is “must-have“ versus “what“™s nice to have.“ If you have three product lines, and one is very profitable, one is marginally profitable, and another one is just being rolled out and is eating cash “” even if you like the product and customers like the product “” it“™s time to either go to one product or two products, says Leonsis. “The “˜nice to have“™s“™ in your business are no longer financeable,“ he says, “and every CEO has to be really hypercritical on what they really need to get to the next phase of their business.“
- Be brutally honest and ask yourself: Is your company going to make it? “We“™re in that time period where it will be survival of the fittest, so I can see some people who have cash literally almost stopping operations now “” getting things down to the bare bones “” just to wait until it gets better,“ says Leonsis. “Because if you run business as usual you will run out of gas and be out of business,“ he adds. Leonsis offers a scenario: A lot of times entrepreneurs, through force of will, will try to make a venture happen. So, let“™s say an entrepreneur has $1 million in the bank, and he“™s losing $100,000 a month. But his business plan says that by Month 6, he“™ll be losing $50,000 a month. The entrepreneur needs to ask himself now: Is that outcome really going to happen? If not “” because sales may be affected now “” the entrepreneur might be better off keeping that $1 million, stop marketing his product, and retool the business. “So, have 10 people in the company and try to figure out how to live to fight another day,“ says Leonsis.