Coming Down

Proceed With Caution

If only the paranoid survive, it pays to be cautious. The economy's growth has slowed faster than anyone expected, and a recession may show up as quick as a champagne hangover.

We've talked to academics who study entrepreneurs, business owners who've weathered these storms before and professionals who work with distressed firms. Here's their advice on dealing with rough financial waters:

Set and monitor benchmarks.
First and foremost, you need to establish realistic goals-and monitor them religiously. , who sold his 300-employee landscape company to ServiceMaster Co. in 1998 and is now the director of the James A. Ryffel Center for Entrepreneurial Studies at Texas Christian University in Fort Worth, notes that only 30 percent of the entrepreneurs in his executive education class have budgets. Do you?

Minor suggests working on zero-based-not zero-growth-budgeting. "Start from scratch every year," he says. "Don't assume you're going to [spend] the same just because you did [before]."

In a slow-growth period, Minor says, it's particularly important to get financial statements from the previous month by the 10th of the current one and to revise your budget every three to six months. "If you're not hitting your top-line numbers, you're going to want to evaluate the expense side," he says.

Not all benchmarks should be related to money, though. "Financial monitoring comes at the end," says Earl Eisenberg, a business consultant and workout restructuring specialist in Chagrin Falls, Ohio. "[But] you also need monitoring at the beginning and in the middle." For example, try establishing the time it should take employees to finish tasks and then monitor how long it takes them to do so. If employees meet interim goals, you'll stay on budget.

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This article was originally published in the April 2001 print edition of Entrepreneur with the headline: Coming Down.

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