Last February, at a major sales meeting in New York, my son who is now running our publishing business looked up and said, “We all know what is going to happen.” At that time, no one – no major economist – was using the “R” word, but we saw what was going on around us. The stock market wasn’t moving as before. Our own advertising numbers for the first two months of the year weren’t coming in as we had expected.
My son said, “When they start cutting, the first thing they’ll cut is advertising and marketing dollars. That’s a given. And the next thing we know is that…cuts will be made in the minority budgets.”
It was almost déjà vu. I said to myself, wait a minute! That was 20 years ago, and now here’s my son just repeating what I had said not too long after we launched our flagship Black Enterprise magazine in the early 1970s.
As much as things change, they don’t really change at all, I thought.
The Life of What You’re Doing
These days, as our company, Earl G. Graves, Ltd., braces for an economic slowdown (if not full-fledged recession), we’re confident that we are positioned not only to survive, but to thrive. Even as we cope with issues specific to being African-American-owned and operated – sadly, racism is, in fact, still alive and well in our industry – we bring 30 years experience and an upscale readership to advertisers who demand plenty in return for the money they spend.
In knowing how to work the system, we also bring a firm handle on an issue that I consider the life of what you’re doing as an entrepreneur. And that is the ability to handle your cash. Whether you’re black or white, just starting out as were 30 years ago, or merely small, or even established as we are now, cash flow matters.
As for us, we watch our cash all of the time. Three decades ago, when I launched the magazine, I was able to turn the corner to profitability within an impressively brief 10 months. Two decades ago, when we faced the worst recession in our company’s history, we acted quickly to take the drastic but necessary step of laying off staff – about 10 of our people were let go, as I recall.
A diligent cash-flow watch has been our tool for spotting problems early and acting quickly. I look at a cash flow sheet every day – when I’m in the office, it’s handed to me each morning. I want to see if we’ve got $5 million in receivables that are 45 days out and to know that the calls are being made to collect that money. I want to understand what the situation is with Black Enterprise on the newsstands. I even want to know about our overnight investments – can we be getting a better rate?
Cutting Back
When things aren’t right with the company’s cash flow, such as the advertising slowdown of earlier this year, I want to begin addressing the situation immediately. Back in February, for example, our first step was to go back to each department head and say, cut a minimum of 10% from the budget. And 20% is better.
A company’s biggest cost is its staff, so we considered the people we had planned to hire at that time and throughout the year. We asked ourselves whether additions to the staff were necessary – would it be detrimental for the company if they weren’t hired? And we disciplined ourselves to make the tough decision not to bring them on.
Then we took a second look at our plans to add a third floor — about 15,000 square feet — to our headquarters on Fifth Avenue in New York. We had already paid an architect and a designer, and we had agreed to take over the space as of the first of next year. Instead, we went back to those professionals and asked that they redesign a portion of the floor – the side facing Fifth Avenue – for a tenant. In leaner times, we wanted to be sharing a costly expense.
Charitable giving was another area in which we were able to make cuts. Although we give at a level greater than the norm for companies our size (and continued to do so this year), we got tough about saying no. Not to the organizations to which we had commitments – my son chairs the Catholic Big Brothers of New York City, for example. But to some groups we said, no, we won’t be increasing our level of giving this year; and to others, no, we won’t be taking a table at your fund-raising dinner.
Managing Cash Flow, Running a Business
Keeping cash flow in line isn’t an end in itself, of course; building the business is. In cutting back, therefore, we have to be judicious about measures as drastic as layoffs, which demoralize the rest of the staff, leaving everyone wondering, will I be next?
We had only one layoff in the history of our company and I don’t expect that we will have to let people go this year.
For one thing, true to our philosophy about cash flow, we’ve kept our organization lean. To keep down the cost of hiring, for example, we’ll extend offers to a number of the interns who work for us each year. Although temporary workers are more costly, the total cost to the organization is less than full-time employees considering we don’t pay benefits. This year, a temp is even assisting my own assistant – and we are getting by.
Just as importantly, I’m loath to tamper with the creative people who are central to our business. Our layoff of 20 years ago didn’t include anyone from the editorial side – they are our lifeblood. These days, I’ve made a point of advising our financial staff to be timely with payments to freelance creative talent, such as writers. If we’re slow with their payments, they’ll remember and act accordingly when we need them.
This year we expect our revenue to be off by as much as 20%. But we also expect to make it through — and to make a profit. The reason is not very complicated. When it comes to managing cash, I keep on top of the numbers. When something is amiss, I press extension 525 – that’s my CFO – and I say, let’s talk. Or I call my controller and say, is there something I’m not understanding about these numbers?
In looking at a cash flow sheet, I understand where we are, and when the numbers aren’t connecting right, I work to understand why. Which keeps our company on top of years such as this one, with the “R” word looming. And also in those years when the “R” word is a distant memory.