Did you know that business, much like war, requires strategy to be successful? One of the most celebrated books on strategy, The Art of War, was written by Sun Tzu over 2500 years ago and is still being used today. To quote Sun Tzu, "Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat." What was true then is still true now.  While there are a number of strategies listed in the book here are just a few steps that can be used to give your business an advantage.   

Step 1: "The Way." Understanding what your customer does to make a profit is crucial. What is the business plan for your potential customer? What steps has the company taken to ensure investor support?  Is the company clear on its product and distribution? By understanding your customer's path, you begin to understand the legitimacy of its product.  After working with different printers, I have noticed a trend surface within the direct mail/coupon segment of the industry. This is an advertising based industry that depends on advertisers to make a profit. If your customer says that it has a distribution network of 100,000 subscribers, but then continually only orders 20,000 copies on its work orders, something doesn't add up. While direct mail and coupon based businesses may not be the only culprit, they are an obvious source of revenue for many printers. Before agreeing to a substantial line of credit there must be an understanding of the actual revenue. Are these companies just supplying advertisers with their own advertisements, or does the company have a legitimate consumer base that allows for their advertising to be successful? By knowing "the way" your customer or potential customer obtains its revenue, your business will have a better chance at avoiding risk of loss.    

Step 2: "The Seasons." Is your customer's product affected during different times of the year? Will you, the potential creditor, have to be patient during the slow times, because other times of the year are more prosperous? By understanding when your client's product is sold, your company can determine the positives and negatives of dealing with a potential customer's profit, which may be erratic.  I have worked with printers that deal with pastry and baking companies specifically. When a credit manager is deciding whether or not to offer a line of credit, the business plan for the potential customer must be examined. Are the products designed for specific periods of time, like Valentines Day or Mothers Day? Does the company have a year long plan, or is it holiday specific? If your customer makes 90% of its profits between September and January how will your company get paid between February and August? Any deal between two companies should be a win-win situation. Knowing the seasons can determine whether a large line of credit can be a flop or a success.

Step 3: "The Terrain." Find out if your potential customer is a smaller mom and pop shop dealing locally, or a larger business with multiple locations nationally. Smaller businesses may be more susceptible to economic ups and downs, and it is important to know the local economy that the business is dealing in. Larger businesses with multiple locations require the same scrutiny, but there are more chances for revenue and for payments to be made on time if there are more markets in which your customer is operating. Obviously, regional sales limit the scope of repayment, while national sales broaden the horizon for potential profit. Knowing the scope of what your potential customer is capable of can help in determining the credit worthiness of any company. Learn about your customers clients. Who buys from them? Where are they located? Are there regional disturbances that may affect the proposed profit? Remember any business endeavor should be mutually beneficial. A big fish in a big pond will always mean more revenue than a small fish in a small pond.

Step 4: "The Leadership/Management." Who is responsible for dictating the company's agenda? What roles are the management responsible for? How is the leadership set up to ensure a profit? Enron, by all means was a successful business plan. The investors were there to set up an energy based business. Commodities will almost always be a successful enterprise if the investment capital is there, and the management team is trustworthy. Unfortunately, the management team for Enron was not trustworthy. The investors and employees lost millions of dollars in investments and income by the time the company folded in disgrace. By understanding the history of a potential customer's management, your credit team can more properly assess the chances for a successful partnership. It is important to look into the history of any management team. Most people will have had previous experience that is public information. By knowing who has done what within the business community your credit team will be equipped to make good decisions with your company's resources.

Sun Tzu may have written the Art of War more than 2500 years ago, but top military officials are, to this day, still employing these strategies. Protecting a nation is no more important than protecting your personal livelihood. Each and every business owner puts their blood, sweat, and tears into every financial endeavor. "We cannot enter into alliances until we are acquainted with the designs of our neighbors."   

Let PICB show you how to implement the elements of The Art of War and ensure the future success of your business.  

RESOURCES: PICB's web portal to government websites that provide real-time, free information such as business registrations, civil records, lien information and much more.

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