Coming Down

Focus On: Customers & Suppliers

Eye your clients.
If more than 60 percent of your business comes from one client, you're overexposed-but you're especially exposed during an economic downturn. "You want to have as many different clients as you can," says Johnson.

At the same time, you've got to curry favor with your stronger clients. "How do you make sure you get your share of fewer dollars?" asks Wallace. "Most of that is a result of your relationship with your customers." Now may be the time to get in closer touch with big clients and spend your skinnier entertainment budget on taking those clients to dinner more frequently.

It's also a good time to develop tighter partnerships with larger firms, says Wallace. In a budget-tightening period, you may win outsourced business by delivering a service for less than big firms can do it themselves internally.

Strengthen your supply chain.
Your customers aren't the only ones to watch. Suppliers impact the health of your business, too.

Even if your business is fine, you have to consider the sources of any raw materials. "Think about critical components and resources you need and how strong your suppliers are," says Gartner.

You might even try to barter with your suppliers, especially if you run a service company. For example, Wallace traded the computer skills of some of his underutilized staff for legal services. "It's kind of like fixed cost," he says. "I'm paying their salaries even when they aren't billable."

Shulman notes that if your own finances start to look shaky, you should approach suppliers early. "A company can negotiate forbearance or stand-still agreements to keep out of the bankruptcy-court arena," he says. That assumes, of course, that you've whittled expenses down and you approach suppliers before problems become acute.

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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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