Monday, March 9, 2009

Beforemath 2 -- Are You Ready for Less Business?

A contingency plan, by definition, is a degree of readiness for an event of some reasonable likelihood. Generally, the timing thereof is beyond your control. So, you imagine the possibility, imagine the impact and define your response. We've used the term "beforemath" to describe this degree of readiness. Here's an everyday example of "beforemath."

At a Chief Executive Boards International meeting, a member shared his "beforemath" plan for further slowdown in his industry. He's looking at the general uncertainties in the economy, and is concerned that perhaps his business will slow down to the point he needs to take actions to reduce his fixed costs.

He has predefined a couple of "triggers" that will determine whether he kicks his beforemath plan into action. Namely, two consecutive months of a net operating loss of $20,000 or more or a drop in his backlog of unexecuted work to ten weeks or less. Easy things to measure, and he won't have to think about whether it's "time" if either of those happpen. This is an important part of a beforemath plan -- to know exactly when you're going to invoke it.

His beforemath actions are a predetermined set of cost reductions, staff reductions, etc. that will reduce his fixed costs, allowing him to operate at neutral cash flow or better at a reduced level of revenue.

Do you have a beforemath plan that's similarly specific? Please click "Comments" below and share it with others.

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Terry Weaver

Chief Executive Boards International

Chief Executive Boards International: Freedom for business owners & CEOs -- Less Work, More Money, More Freedom to enjoy it

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