1. Plan for the worst-case scenario, then take action as if it has already happened. Forecast needs assuming another 10% to 15% decline in sales from current levels. Avoid in particular the tendency to hold on to people too long. This puts at risk the jobs of your A-level associates. Consider mothballing locations.
2. Turn or burn. In this slowdown, even the lead times needed for roofing products are less than a week, so why keep on hand products that you can get quickly from the supplier? Likewise, discuss with your supplier its stocking levels. You might be able to rely on the supplier's inventory. Look also at your ratio of accounts payable to the value of your inventory. If accounts payable is only at about 50% of inventory, try to push it closer to 100%.
3. Reset all inventory reorder points. Determine what you need based on the past three months' rolling average, then recalculate needed quantities every weekend.
4. Advertise only when people are ready to buy. Use only targeted special co-ops ads on products when in season. Eliminate Yellow Pages advertising.
5. Bill special orders upon receipt. This helps assure both the customer and the sales rep will try to estimate a reasonable target for when those special order items will be needed.
6. Limit the amount of accounts receivable exposure to any single builder organization. No more than 10% of your equity, including shareholder loans, should be tied to any one account.
7. Institute an "environmental fuel charge." The one that has drawn the most traction is a flat charge of $25 per delivery.
8. Prepare three-year pro forma financial statements, and share them with your lenders.Giving them a realistic briefing on what steps you've taken and will take should lower their anxiety levels. Give best- and worst-case scenarios so that lenders can see you've given real thought to your plans.
9. Apply for the 50-cents-per-gallon federal motor fuel tax on propane used in forklifts and bulk purchased propane. This runs through Sept. 30. Go to www.propane.tx.gov/ for a sample form. Form 637 is at www.irs.gov.
10. Conduct an after-action review. Do this daily or weekly to see how scheduled tasks turned out, and what added emphasis is needed in the future to insure success.
