It may be an understatement to say that life in the juvenile industry has not gotten any easier over the past few years. Not that there were ever true "glory days" when the business was easy and the profits flowed freely. But, it seems that the prolonged weak economy, increased costs and uncertainty associated with tighter regulations, and unrelenting pressure from major retailers have combined to create a lot of sleepless nights lately for many JPMA CEO’s.

During times like this, it’s always tempting to blame the economy, hunker down, and wait for things to get better. That may not be such a good idea. First of all, things may not get better quickly enough for you to stay alive. But, even if they do, you may actually be squandering a golden opportunity.

Think of an economic downturn as a stress test for your company—not unlike the monitored treadmill exercise used to detect heart abnormalities. Healthy companies should still do reasonably well when the economy is weak just like healthy people should be able to pass a cardiac stress test with no ill effects. However, there may very well be design flaws in your current business model that were all but invisible when the economy was booming but will stand out like blocked arteries in an angiogram when business slows.

Or, you may have been aware of the need to make painful improvements like reduce costs or make personnel changes but were reluctant to perform the necessary surgery while things were going reasonably well. [These medical analogies show I’m obviously spending too much time talking to my contemporaries in the industry.] 

If you’re not getting the financial results you’d like during the current economic malaise, here are some of the questions you might want to ask yourself:

Is your competitive advantage still strong enough?

Be honest with yourself. Do your products really have enough value superiority over your competitors such that you are the clear choice for your target customers? If not, how can you regain your edge? Accomplishing this will not only make your products more appealing to consumers but will also make you more important to retailers thereby putting you in a better price bargaining position.

Are you maximizing sales with your current customers—retail and consumer?

This is the low-hanging fruit. Are you putting in the effort to really understand the needs of your existing retail and consumer customers so that you don’t miss opportunities to gain ground. Could you be selling more products to consumers who are happy with what they’ve bought from you? What would it take for your major retail customers to expand your presence?

Are you missing opportunities to expand distribution?

Once you’ve maximized business with your current customers, what are all the possible new revenue streams you could create? If you’re a regional company can you become national? If you’re national could you be international? Are there new classes of trade that have potential? Be careful though. Some new markets may be costly to enter.

Can you eliminate or re-price programs, products, services or even customers that are not profitable?

I’ve always been a big advocate of analyzing profitability by customer, product, region, salesman, etc. If you’re not making money at these micro-levels, something probably needs to change.

Are you managing your cash flow as well as you could?

You can get away with sloppy cash flow management when things are going well. But it will come back to haunt you in tough times. Make sure you have a good cash flow projection process in place so you are not blind-sided by cash shortages. But, just as importantly, get innovative about what you could do to radically decrease your inventory requirements, reduce credit losses, ramp up collection speed, or get better payment terms from your suppliers.

Is it time to make those tough personnel decisions?

A business friend of mine used to talk about how, when business slowed, he would simply keep laying off employees until he was virtually the only one left. Hopefully, you won’t find that necessary. However, it might be time to objectively assess both the number of people in your employ and their productivity. This is not something that should be done without concurrently assessing the quality of the processes that your employees are operating within as well as the training you are providing.

Are you leveraging new and emerging technologies?

And, while you’re looking at your processes, are you taking advantage of software and automation that could reduce operating costs and improve quality? Are you staying up to date with what’s out there that’s working for others?

Have you read my earlier blog posts?

Excuse me for a little self-promotion, but if you haven’t already, you might benefit from reading or re-reading my previous blog posts where I offer a number of other revenue enhancement and cost reduction ideas. Or, even better, take advantage of JPMA’s CEO Mentor program where for a small donation to K.I.D.S. I’ll give you some objective feedback regarding your current business model. 

If you look at economic downturns as opportunities to improve rather than times to head for the bomb shelter, you can come out the other end as a much stronger company better positioned for future recessions. What’s this downturn telling you about your business?

Disclaimer: No warranties, express or implied, are contained herein. Purchasers, or users, of this information acknowledge that any errors or omission in the performance of the material contained herein or, any injuries resulting from its use, are the sole responsibility of the purchaser or user, and not JPMA or the author. Opinions expressed are those of the author only.