Thriving in Economic Uncertainty

At a recent trade show I attended it did not take Sherlock Holmes to deduce that the traffic was down considerably. Today’s economic uncertainty has the market in turmoil, as businesses see cutbacks in all areas of their companies, layoffs and declines in revenue. All of this makes it difficult to pull the trigger on a buy for any inventory or even to sell the obsolete or slow moving products.

The concerns that I heard were we can cope with the economy and the operation of our business but our largest concern is the uncertainty of what the government is going to do next. Questions about taxes, bailouts, taking over corporations and financial institutions, and health care throws the business decisions into a tailspin.

To get the private sector moving again the business people I spoke to said that the government has to get spending and entitlements under control. Deficits cannot continue and expect businesses to thrive.

With that said, I understand the hesitation of buyers and sellers.   From the sales prospective you need inventory in order to make a sale, but from the purchasing side one too many pieces is costly to the company. How do you solve this situation?

From my discussions with colleagues the answer is to put yourself in as good a cash position as possible, eliminate discontinued inventory or slow moving product to make room for cash bank deposits. With the cash in hand now you are in a position to have the product that is selling; you can command concessions from your suppliers for timely shipments and smaller order quantities.

The additional cash makes payments easier without drawing on your credit line, your inventory is less so you have less carrying costs, and you may have some tax advantages by the elimination of the old inventory. You are also in a better position to do what I call a “Deal Buy” something that comes up which is too good to pass up.

Keep your eyes open for opportunities that will make you money as well as your customer. For instance a plumber I know purchased four truckloads of vitreous china drop in bowls for a job he had already started. These were from a manufacturer that had a huge overstock and needed to eliminate a warehouse. The contractor saved over $80000 by purchasing this product. In fact his savings was more than he paid for all four truckloads. He was happy and the manufacturer was able to close the outside warehouse. Both were satisfied with the outcome.