Small Business: Being ready for another downturn

ClearVision Optical president David Friedfeld says he went

ClearVision Optical president David Friedfeld says he went into the recession with too much optimism. He is now setting up plans to take his Hauppauge company through the next downturn. (Credit: John Dunn, 2011)

Jamie Herzlich

Newsday columnist Jamie Herzlich Jamie Herzlich

Herzlich writes the Small Business column in Newsday.

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David Friedfeld doesn't know when the next downturn will hit, but based on this past recession he isn't taking any chances.

Friedfeld, president of ClearVision Optical in Hauppauge, says years of double-digit growth gave him a false sense of security. The eyewear distributor, founded in 1949, had weathered downturns before.

"I was too optimistic," Friedfeld says. "We thought it was going to be a typical recession . . . maybe a two-quarter dip."

Next time -- and there's always a next time -- ClearVision will be prepared. The recession forced the company to reassess its operation and look at new revenue channels and ways to improve efficiency. Experts say all businesses should do the same going forward, even in better times.

"When things are going well, one tends to get comfortable, and you simply can't do that," says George Cloutier, chairman of American Management Services, an Orlando turnaround management consulting firm and author of "Profits Aren't Everything, They're the Only Thing" (HarperCollins; $24.99). "You have to strive for additional profits and cash flow every day."

Stay vigilant in good times

ClearVision recognized this and since 2011 has worked to create sales channels beyond optical shops, says Friedfeld. The company now sells direct to consumers through websites such as RueLaLa.com and will also start selling nonprescriptive sunglasses by 2014 in stores such as Nordstrom Rack and Dillard's. ClearVision is also developing private-label collections for some of its larger customers, Friedfeld notes.

The company asked employees for ideas to improve efficiency and worked with vendors to find savings, cutting costs about 7 percent, he says.

Companies need to be prepared to do an "invasive self-intervention," explains Zev Asch, president of East Northport-based LEDAZA Inc., a marketing firm specializing in small business and a board member of the nonprofit group Long Island Advancement of Small Business. "The process really requires you to do surgery on yourself without anesthesia."

Ask yourself, "Am I able to differentiate myself and have a convincing argument on why my customers should do business with me?" says Asch, who addressed preparing for a downturn at a recent LIASB meeting. "Question and measure everything," he says; don't get complacent.

Continually review what's being measured and what's not, advises Jerry Siegel, president of JASB Management Inc., a Syosset-based management training and development firm. Ask yourself a series of "what if" questions, such as what if revenue decreases 20 percent, or what if a top client goes under.

"This will allow planning for the unexpected," he says. Ask your managers to develop contingency plans for worst-case scenarios.

And identify your most vulnerable competitors. "Recession is a great time to buy a business," says Siegel.

Keep cash available

Consider having a rainy-day fund you build for lean times. That helped ClearVision continue to invest during the recession, Friedfeld says. "Make minimal investments in real estate and stay in cash," adds Cloutier, noting that includes not moving to more expensive digs.

Assess each employee to see if he or she improves your bottom line. If not, look to fix that or consider cutting the person, says Cloutier. Also, consider raising prices where the market will allow, he notes. "We're in a different business environment today," adds Friedfeld. "You have to always prepare for the future."

To be ready for the next downturn, ask yourself these questions:

1. What business are we in?

2. Why should anyone buy from us?

3. Do we know our competition? Have we thought about it globally?

4. Do we know our customers?

5. Do our customers know us?

Source: Zev Asch, LEDAZA Inc.