GOOD ADVICE FOR SMALL BUSINESSES

Nothing exposes a weak business plan like a down economy. But how do you develop a better strategy? For 27 years, George Bergmark, a member of the Rotary Club of Sandy Springs, Ga., USA, managed the finances of emerging and midsize companies. He’s now a partner at B2B CFO in Georgia, where he teaches clients how to maximize profits.

The Rotarian: How should an owner evaluate a business plan during a recession?
George Bergmark: Ask yourself, Are my assumptions about my organization reasonable as they apply to today’s economy? How are my competitors doing? Some people forget to think about their suppliers. How are they weathering the economy?
A budget and a business plan are really just a point in time. Many people will do a budget and it goes on a shelf. What happens when the assumptions you made change? You have to update your plan.
TR:What’s one common mistake to watch out for?
Bergmark: When you write your business plan and budget, it’s easy to plug some assumptions into Excel and make it seem like you’re going to make a million dollars. Take a look at three different cases: worst case, expected, and stretch. The greatest day and the worst day is the day you land Wal-Mart as a client. That’s a stretch budget: What am I going to do from a capital standpoint? Do I need more storage space? A lot of people only think about a revenue budget, but rapid growth will kill a business just as fast as no growth if you’re not paying attention to your cash flow.
TR: What are the first signs that a strategy isn’t working anymore?
Bergmark: You’re out of cash. That’s the biggest red flag. But there can be other warning signals. Customer service may begin receiving complaints, or sales start to fall off. You have to have a worst-case plan. We go through these bubbles, and we fool ourselves constantly. It’s hard to recognize when the economy is going to fall apart.
TR: Changing course or working with a smaller budget can be difficult. What’s the first step?
Bergmark: Recognize that the economy may not go back to what it was. The faster you adjust, rather than waiting for things to improve, the better the odds that your company adapts and continues to grow, even after a setback.
TR: What advice would you give to someone worried about going out of business?
Bergmark: First, look at reducing your costs. You might be surprised by how little you need to keep going. Second, surround yourself with a team of trusted advisers who will be honest with you. Look at your Rotary club. Within your club, you can probably find an accountant, lawyer, CFO. After all, Rotary was created for business owners to help one another.