Standing Strong in Uncertain Economic Times

1. As the economy continues to slow, it’s an important time to examine your business model and challenge paradigms. Some of the dealers in our network see this as a time to make strategic investments to be ready for the upturn, while others are taking a “batten down the hatches” approach. Individual strategy comes down to the principal’s financial strength and risk tolerance. No matter whether you decide to stay your course or adopt a new strategy, it is an important time to evaluate your internal processes. Standing Strong in Uncertain Economic Times Dealer Best Practices Financial Acumen Series

2. Strategic Planning sets the direction for action. A good strategic plan includes: • Mission and Vision • Goals (forecasts), • Financial performance (budget) • SWOT analysis. • SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats). This analysis should be a team approach to ensure all aspects of the business and marketplace are considered. Build the plan, then work it. • A SWOT analysis should be done that considers: • The Market • The Competitors • The Dealership Standing Strong in Uncertain Economic Times Dealer Best Practices Financial Acumen Series

3. Standing Strong in Uncertain Economic Times Sales “all hands on deck”. Discipline in business development is essential. It is critical to make sure that sales people are planning and doing near term forecasting. Networking is a must leaving no stone unturned. Sales leaders need to show a true passion to ignite the dealership. Collaborative planning should be a key to driving the expectations between the dealer and local Haworth sales team. This needs to be a living document used as a roadmap for attacking the market throughout the year. Dealer Best Practices Financial Acumen Series

4. Standing Strong in Uncertain Economic Times Invest while others are cutting?Some organizations have the financial strength to make key investments as others are cutting. This should position them well for the eventual upturn of the economy. It’s a bold move that doesn’t come without risk, but it could be a once in a lifetime differentiator. Dealer Best Practices Financial Acumen Series

5. Standing Strong in Uncertain Economic Times Revenue stream quality. A diversified client mix is critical to sustaining business. What segments do you play in and how profitable are each to your organization (i.e. Commercial, global, healthcare, education, government, etc…). Having a mix is important, but focusing energy where you can maximize return should also be a consideration Revenue expansion. In these times of surcharges, Design, Project Management and other service charges are becoming more acceptable. It’s also a good time to look for ways to expand business within past or existing customers, which is one of the most successful ways to grow. Dealer Best Practices Financial Acumen Series

6. Standing Strong in Uncertain Economic Times Delay and/or cut discretionary expenses. Reduce/restrict spending in areas such as Travel, Entertainment, overtime, asset purchases, etc. Reduce non-productive assets. Sell non-project related inventory, mock-ups, and other unused assets to increase cash and reduce storage requirements. This may also create opportunities to sublet unused office or warehouse space. Dealer Best Practices Financial Acumen Series

7. Review your organizational structure to ensure that all functions are critical to sales and customer satisfaction. There may be opportunities through process re-engineering to consolidate roles or redeploy resources to higher value areas. Changes create paradigm shift. Staff assessment Getting the right people on or off the bus to ensure a lean but strong organization is vital. On the sales side, this may mean taking an objective review of sales and GP delivery by salesperson and setting new standards as to what is required to be successful at your company. Adjustments may help others to understand the serious of the situation and the need for everyone to step-up their game to survive these challenging times. Upgrade staff selectively. A downturn may provide opportunities to add key talent that otherwise would not be in the market. This may require adjustments in other areas to balance your overall cost structure. A staffing analysis utilizing OFDA Benchmarks will allow an independent look at headcount numbers and reveal where there may be either untapped capacity or capacity that’s a duplication and can be eliminated. Standing Strong in Uncertain Economic Times Dealer Best Practices Financial Acumen Series

8. Standing Strong in Uncertain Economic Times Cash is king. We’ve witnessed large and small corporations go out of business overnight. Cash deposits should be required on all projects. This boosts cash flow, ensures commitment, and mitigates risk on upfront project expenditures. Deposits should be consistently secured on both dealer and direct billed business. Ensure cash availability. This may mean staying more liquid by delaying capital investments or by borrowing prior to an actual need. Flexibility may be worth the additional cost. If you have excess cash, you might consider an investment policy that prioritizes safety of principle and liquidity ahead of yield. Dealer Best Practices Financial Acumen Series

9. Standing Strong in Uncertain Economic Times A/R management is critical and requires the entire team’s involvement. The process starts with solid terms and conditions. Past due accounts should receive significant attention to not only ensure customer satisfaction, but to mitigate collection risk. Many customer companies are dependent upon their banking facilities or other credit markets to provide liquidity, the reliability of which may be suspect. One large non-collectable account can severely affect your company’s financial health. Direct Billing allows Haworth to manage the credit risk, mitigates working capital requirements, and provides your return more quickly. While you forego pre-payment discounts, the added flexibility and financial assurance is well worth the trade-off. Dealer Best Practices Financial Acumen Series

10. Standing Strong in Uncertain Economic Times Maintain and grow banking relationships. Many banks are being restrictive on credit facilities. If the bank’s capital base cannot support it, even long lived relationships can close down overnight. Credit line renewals are not assured and will most likely come with higher pricing. In any event, the best time to establish this type of relationship is when you don’t need funding! Maintain supplier credit facilities. Focus on the on the 4 C’s of credit. Character, Capacity, Capital, and Conditions. Character is one of the biggest determinates and can override all other elements. The fastest way to shut down a credit line is to make commitments and not follow through. Capacity includes the ability of the company to pay and to get paid (how well it can absorb bumps). Capital usually refers to the strength of balance sheet and owner’s investment. Conditions are the overall market that credit is being extended in, which includes industry considerations. Dealer Best Practices Financial Acumen Series

11. Standing Strong in Uncertain Economic Times We are hopeful that this provides thought starters to support your pursuit of profitable share growth. Should you have comments or wish to discuss this topic further, please send me an email Dan.Zona@Haworth.com. Dealer Best Practices Financial Acumen Series