1. Review your business from stem to stern as if you were a potential dispassionate financial buyer.
  2. Identify and invest in your core business.
  3. Take measures to promote free cash flow. One possibility is to sell non-core assets and convert them to cash. Another is to review terms of trade with your suppliers and consider if you can negotiate longer payment terms.
  4. Free cash flow is KING. Even 50% loan to value ratio now without adequate free cash flow will not assure obtaining a loan. Bank regulators are focusing on free cash flow which is why banks are doing the same with their customers.
  5. Consider ways to promote free cash flow and preserve capital:
    • Delay capital spending and nonessential purchases;
    • Consider leasing instead of purchasing essential items;
    • Defer hiring new employees and eliminate unnecessary positions. However, take time to plan employee terminations before you deliver the pink slips to minimize your exposure to post-termination compensation demands or litigation. Consider if your employees are "at-will" or have been promised a fixed term of employment. Also, when preparing to terminate an employee do not overlook your employee handbook when assessing the rights and benefits that may be due the departing employee. If you plan on undertaking a workforce reduction certain advance notice and other procedures could be applicable;
    • Eliminate unprofitable product lines, services or customers. Analyze areas of profit and loss in your business. Which activities bring the best returns and which either lose money or generate only a marginal profit;
    • Keep your core customers happy. Many businesses focus energy on new business customers and often miss the best opportunities for incremental sales with their existing base of satisfied customers. Look for ways to keep that income stream flowing. Explore willingness of key customers to lock into long-term contracts - this can secure and stabilize your order flow and could help them ensure their source of supply;
    • Tighten credit controls on your customers. Ensure that your customers understand your payment terms and that good relationships with you are founded on timely payment. It may be time to fine tune your terms and conditions of sale to facilitate recovering costs of collection;
    • Send out billing statements promptly. You cannot collect from a customer who is not billed;
    • Review all real estate leases and consider renegotiating for more favorable terms - for example, lower rent for a longer lease period; and
    • Minimize fixed payments where possible.
  6. Do not cut areas which are essential to preserving core business and free cash flow:
    • Continue to market core base;
    • Do not cut core sales force; and
    • Do not cut services which are important to preserving your business.

Even In These Times Opportunities Exist: Be Prepared to Seize Them

  • If you are fortunate to have excess cash reserves this could be a good time for you evaluate opportunities to acquire a business that is a high-quality strategic fit for your company and may be struggling or is simply at a stage in the business owner's career cycle where they want to cash out.
  • Follow market growth - are you selling your products oversees? Do your key customers have offshore requirements that you could help satisfy if you had a presence in those markets. Are you selling into Canada? Canada is the largest trading partner of the U.S. China still provides access to a vast number of potential customers and resources for competitively priced manufactured goods. Evaluate your international market opportunities.