“The Smart Ones:” How to make money in a down economy

-I am often asked “how are your clients fairing in this economy…. Any of them making money?
My answer is always… “Yes, most of them are actually, the smart ones are definitely making money”. So who are the smart ones they ask?

Those that watch their overhead carefully and keep their costs in check even when enjoying a great year. My most successful clients have kept their overhead down even during good times when the urge to upgrade the facility, add some additional personnel, lease that new luxury sports car you’ve had your eye on, are all very tempting for sure. Some moves, of course, become necessary as a business grows, but the smart ones can make the right choices between things the business really needs to grow and things that might be nice to have. Don’t make long term commitments based on short term sales spikes.

Those that watch their sales backlog very carefully and know whether they should be ramping up or pulling back. Business runs in cycles. Even the best run companies are going to have their slumps. The smart ones know that sales backlog is a key indicator in what lies ahead and they have a good system for tracking it. When that number starts to drop off the smart ones know what moves they have to make to keep expenses from getting ahead of revenues.

Those that invest in a great management team and surround themselves with good people. Jim Collins’ classic book on business “Good to Great” put forth a concept that we practice here at our firm, that is go out and get the right people on the bus. Once you’ve got the right people you can make sure that you’ve got everyone in the right seat. Lastly you figure out exactly where you want to drive the bus. But, with the right people on board, you can go almost anywhere you want to.

Those that stick to what works best. Many successful businesses are not glitzy or glamorous but stick with a reliable business model that has withstood the test of time. Walk into any hardware store and you’ll still find an aisle filled with nuts, bolts, screws, fasteners and nails. There may be modern methodologies for making these products but the products themselves have stood the test of time. The demand has never gone away.

Those that stay on top of technology trends and gain efficiency. There are still only two ways to make more money in business, increase sales or reduce expenses. The global market has gotten more competitive and increasing sales isn’t always easy to do, but the smart ones find ways to reduce costs through use of modern, efficient technologies. Industry conferences, trade shows and industry publications are just a few of the ways to stay up on what’s out there that can help you shave your cost per unit and increase your margins.

I have been fortunate to have met and served many successful entrepreneurs over the years, including more than my share of smart ones. My firm, GKG CPAs is the proverbial “bus” filled with the right people in the correct seats, always heading in the precise direction of success for our clients and our company.

-Don Karlewicz, Managing Partner