A drought will expose the bottom of a stream. When the water is low, you can see the rocks that weren’t visible when the stream was flowing at full force.

The same is true of a business in a slow economy. All of the little rocks — the things that aren’t working so well — become crystal clear when times are tight.

For the past few years, manufacturers and distributors have spent a lot of effort clearing out their “rocks”: fine-tuning processes, getting rid of inefficiencies and streamlining operations. Many businesses cut costs to the bone — trimming salaries, benefits and even employees.

The question now: What’s next? What’s your game plan for taking advantage of what could be a period of economic recovery?

Move thoughtfully. One of the keys to managing through recovery is to take your time. Think before you go back to doing things the “old” way. For example, if you cut your profit sharing or 401(k) match, consider gradually phasing it back in as you gain financial strength.

The same goes for salaries. Consider a one-time payment to make up for salary cuts, or provide a gradual salary increase. Taking things slowly will provide you with more flexibility, which may be prudent given the uncertainty of the recovery.

Benchmark. See where you stand relative to other companies in your industry by analyzing common industry benchmarks. For example, are salaries, advertising costs and travel budgets in line with your competitors? You may realize that the money you were spending in certain areas prior to the recession was not providing enough bang for the buck. If that’s the case, save your money.

Barnes Dennig partnered with USI Insurance to produce a Compensation & Benefits Benchmarking Study of local distributors last spring, and we are currently working with Graydon Head and Wells Fargo Insurance Services to collect similar information on local manufacturers. Contact us to learn more about participating in the study.

Hire appropriately. It’s tempting to go back to the old organizational chart and start rebuilding staff. But first, examine the positions you’ve been living without and think hard about what you’re missing. The same production or maintenance function you had before may not fit your needs moving forward. Now is the perfect time to reconstruct your org chart to fit a new business model.

Focus on what’s profitable. It’s likely that you downsized certain areas or product lines because they weren’t as profitable as others. As you recover, maintain maximum profitability by focusing your offerings on those that deliver the most return. This sounds elementary, but old habits can be difficult to break, and standby product lines can be hard to jettison permanently.

Use temporary help. If you aren’t confident that your growth is sustainable, hire temporary help to assist in the short-term. This solves several potential problems, including morale-busting staff layoffs if things slow down again.

Save where you can. Less travel, more video chats. Fewer face-to-face meetings, more online document sharing. It’s amazing how manufacturers and distributors have adjusted to a different way of doing business by embracing new technologies. These money-saving efforts should continue as long as they serve your business.

The bottom line? Keep your break-even point low. Don’t reinstate former spending levels just because your business is picking up. Enjoy the market improvements in your industry, but be prudent.

 This article was reprinted with permission from the Winter 2011 edition of our Manufacturing & Distribution newsletter. For more articles related to manufacturing, distribution and other industries, visit barnesdennig.com/publications/newsletters.

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