Yury Yavorsky – The crisis will be back. What is to be done? (страница 2)

Attempts at predicting crises remain worthwhile, but it’s far more important to understand what needs to be done when dark clouds have gathered and there is a storm coming or, even worse, when you missed the storm warnings and it has caught you unawares in the open ocean.

“Business Resection” or Ways to Cut Spending

Take urgent action!

No matter how well you have planned for it, the crisis will strike suddenly – just as with too much alcohol, intoxication sets in suddenly and the brain shuts down. You may think you are drinking in a measured way, and you do not drink much generally, and yet – bam! – you miscalculated…

You wake up in the morning to the national currency losing 20—30% of its value or oil prices more than halving, and everything has fallen apart at the stock exchange… Your debts are now doubled; the suppliers, who were so favourably disposed just yesterday, have become your enemies demanding the return of their goods. Not the money that has already lost some of its value and keeps depreciating daily, but the product that you have already processed or put up for sale.

You forget about food, about the holiday package you bought, and you immediately cut short your honeymoon trip. You can feel the shackles on your wrists chaining you to the oars, making you a galley-slave of the crisis. Incidentally, most entrepreneurs do not realise that it is impossible to handle the economic storm – you might as well get in the way of a herd of bison careering for no apparent reason from distant pastures in your direction!

The economic agony in troubled times is characterised by the chaotic movement of information from one pseudo-analyst to another who is no less well “informed”. They vy with each other to predict the timescale and depth of the slump, recalling all the crises since the Great Depression. People, both with and without money, begin thrashing about: some, to keep their money; others, to dodge unemployment.

Most entrepreneurs act in the same way. These are the laws of the crowd and the psychology of how people behave in the same misery. There is an urgent need for a leader – someone who knows which way to turn. Even those who have forgotten what a TV is, keep turning it on to watch the news. Old business pals are at once able to find an opportunity to get together, even if for various reasons they have not seen each other for many years. The world is losing its mind, and an entrepreneur who is unprepared for these changes goes insane too.

A different scenario is also possible: when the crunch comes, adrenaline levels in society begin going through the roof, and a young businessman tough it out, rolling with the blows of the crisis’ waves slamming against the side of his ship amidst an ever-intensifying storm. He will neither furl the sails nor down the masts. He is banking on luck or his own dedication, determined to fight till the bitter end.

The raging ocean reaches up to the sky. Wave after wave. No rescue in sight.

The staff, who are being washed overboard with each new wave one by one or by the dozen, keep calling out to their employer, begging him not to abandon them, not to stop paying salaries, and not to shut down operations. The captain is stubborn as a bull and wants to preserve traditions, to remain a recognized leader. He believes that he’d better perish himself than betray his people. So noble-minded. But so stupid!

At the very first signs of a crisis, any entrepreneur must immediately whittle down the scope of his or her business, namely:

– reduce floor space;

– downsize production staff;

– stop redundant machines and production operations;

– scale back the supporting infrastructure;

– delay all (!) outgoing payments from several weeks to three months;

– accept all advances or full payments for both current and future shipments. Take all the money that someone is giving you at this time;

– take any orders, even ones making little economic sense, at the cost price, or even complete loss makers, as long as there is work;

– sell all slow movers at any price – by the time the crisis reaches its peak, you need cash, real money instead of useless junk;

– sell off cars and all unnecessary equipment. Offload unnecessary property; like it or not, it will surely be cheaper for many years following the crisis;

– cut back on the driver and the secretary, stop going to fancy clubs and spending money on clothes, cars and other luxuries;

– make a list of all funds available to you, and build your untouchable nest egg enough to sustain you for two or three years should you lose everything else to the crisis, and keep it hidden, say, in a safe deposit box;

– shut down your factory, or store, the whole business for two or three weeks to recuperate, get your puff back, and gather your thoughts;

– furlough most of your staff for as long as is permitted by law.

After these emergency measures (which should take three to five days at most), you should start downsizing your business for real and “for good”, not just provisionally. This is the hardest part, because it can be very painful – inevitably saying good-bye to highly valued employees who may even be your relatives.

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