The time to take the measure of your management’s capability is when business slows down, not when everything is booming! Slowdowns can disclose earlier management ‘excesses' that may require correction to prevent a loss of profitability. Some economists predict a mild slowdown from the frenetic economic pace experienced in 2007. Here are six moves to consider to help keep you profitable should a business slowdown actually occur. 

1. Analyze your current clients. Find ways to show clients that you appreciate their business. Stay closer to your top clients and look for opportunities to serve them with additional products and services.

2. Watch your margins. Review your pricing strategy and keep up with supplier increases. Work with key suppliers. Consider consolidating purchases and negotiate a better deal or improve terms.

3. Monitor employee productivity. Your people are a large fixed expense category. Divide your total personnel cost by total revenue to compute your sales per employee. Divide your total personnel cost by total gross margin to find your gross contribution per employee. Reduce or eliminate overtime hours. Look for ways to eliminate outdated or unnecessary activities and redeploy personnel to maximize their effectiveness. Be sure incentive pay for management is tied to profitability and improved results.

4. Avoid reducing marketing and sales effort. Business slowdowns often cause competitors to pull in their horns. You may gain significant market share if you maintain effective marketing and sales efforts when others pull back. Tie sales incentive compensation to gross profit contribution.

5. Watch cash flow and working capital like a hawk. Tighten up on serious past due accounts. Take a physical inventory and identify obsolete and slow-moving stock. Control inventory closely to avoid shrinkage. Dispose of obsolete items at a discount to help build cash. Avoid buying more when the item is already in stock.

6. Review significant fixed costs. Request competitive insurance quotes for property and casualty, and general liability. Eliminate duplicate coverage. Get a reliable second opinion on employee benefit plans. Check utility rates and consider changing electricity suppliers if significant savings are possible. Consider reducing or eliminating some owner and management extras added during boom times.