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Five Lessons From Recession Woes

(June 2011) posted on Tue Jun 07, 2011

Lessons learned from enduring a difficult and complex business enviornment.

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By Marty McGhie

Lesson 2 – budgeting your capital acquisitions: Money spent on the purchase of new equipment, new vehicles, property improvements, or any other kind of capital expenditure needs to be scrutinized very carefully, especially when times are tough. The past two years have actually brought our company a much better discipline in terms of acquisitions. While it might seem easier during a recessionary business environment to say, “Hey, let’s just stop all of our capital acquisitions for awhile,” it isn’t really very practical for most shops. What is practical, however, is to implement a budget process for all capital expenditures.

Let me recommend a process that has worked well for our business: Put together a full list (aka “wish list”) of everything that you might need to acquire within the next few years. Keep smaller purchases (anything less than $1000 or $2000) off the list because they are more manageable. Categorize each acquisition as an “A,” “B,” or “C” purchase. The As have the highest priority. Then rank the A, B, and the C categories into their own priority order so you know what the most important acquisitions to the business are. When cash becomes available, make the purchases. This is a much more organized and planned approach to spending precious dollars on your capital needs, and you’ll ensure that all of the company’s acquisition needs are met while keeping on budget.

Lessons three, four, and five
The final three lessons deal with employee costs, efficiencies, and customer care.

Lesson 3 – dealing with employee costs: We often take for granted just how much money our employees cost. The fact is, employee costs usually represent one of the highest costs to our business, thus need to be the most tightly regulated. Learning how to keep your employee costs down can help your business save a lot of money. At times, we move too quickly when it comes to choosing to hire a new employee, often omitting necessary steps to evaluating whether or not we really need an additional employee instead of perhaps improving some processes and gaining efficiencies in alternative ways.