The year 2024 is approaching its end, and the struggles faced across various industries are becoming starkly evidentWhile some companies have quietly exited the market, including many that were once shining stars, others have managed to endure the stormHowever, even those fortunate enough to hang on find themselves grappling with how to survive in such harsh conditions.

It is crucial to understand that, apart from the favored few backed by substantial resources, most enterprises are engaged in the pressing quest for survival.

As we stand on the brink of 2025, what can businesses do to adapt and thrive? I propose that conducting an "extreme survival test" should be a priorityThis concept involves simulating the scenario in which all favorable factors vanish and unfavorable ones accumulate, prompting businesses to rethink how they can maintain positive cash flow in their operations.

If the leadership within a company lacks this recognition, it is unlikely that employees will take the initiative to devise such pessimistic contingency plans

Therefore, it is the responsibility of the leaders to take proactive measuresIf they do this well, their enterprise can navigate through the turbulent waters, with all employees reaping the benefits of the journey.

Here, I would like to outline several key suggestions:

1. Revenue Assessment – Identify Your 'Ballast'

In times of recession, companies are likely facing a severe decline in revenueEach dollar earned becomes extremely valuable, and any potential loss prompts a desperate effort to preserve every segment of the businessHowever, this mindset can lead down a misguided path.

Revenue streams may originate from various business lines, but only one category can truly be seen as a "ballast" – the revenue formed by utilizing the core competencies of the company to meet the demands of primary clients.

To clarify, commoditized products rely on the general capabilities of the business and meet only the superficial needs of customers

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Growth for these products often comes from prevailing market trendsWithout those trends, the overall market size shrinksShould companies continue to pursue commodity products under these conditions, they risk engaging in destructive price wars that ultimately lead to compromised qualityThis path can irreparably damage a company’s reputation and viability.

Thus, I'm not suggesting that revenue from non-core areas is irrelevantRather, pursuing these streams incurs significantly growing costs with no clear futureFurthermore, a scattered focus dilutes the company’s strategic priorities, weakening its core competitiveness and leading to mediocrity in the competitive landscape.

I understand the reluctance of some leaders to relinquish their hard-fought territory, opting to endure longer in hopes of outlasting their competitorsHowever, it’s urgent to acknowledge the need for change.

2. Expense Review – Identify Your 'Lean Meals'

An effective business strategy follows the principle of "determining expenditures based on revenues." With declining income, cutting expenses becomes not just sensible but necessary.

Since 2022, the terms "cost reduction," "streamlining," "enhancing quality,” and “second entrepreneurship” have dominated corporate rhetoric

Yet, the actions that followed these statements often only conveyed a sense of cold reality without actually achieving significant reduction of unnecessary expensesFor instance, switching courier services from a premium provider to a cost-saving alternative or skimping on supplies offers minimal savings.

In discussions with various clients, I frequently emphasize the concept of 'lean meals.'

This metaphor likens a company to an individual undergoing a weight loss journeyAn individual must recognize that purchasing junk food not only wastes money but also expands their appetite and misaligns their preferencesSimilarly, a significant amount of "ineffective" spending within a company fails to produce any substantial benefit, inadvertently leading to a spiral of additional unnecessary costs.

Over the past few years, I have repeatedly observed leaders launching initiatives that lack clear business objectives, only resulting in increased staffing and expenditures that balloon uncontrollably

Increasing costs is easy, but reducing them proves challengingOnce resources are allocated, asking to take them back presents a monumental task.

What constitutes 'lean meals'? They provide the essential nutrition needed for the body to maintain a low burden state while enhancing physical capabilitiesProminent athletes like LeBron James and Cristiano Ronaldo exemplify strict dietary controls that contribute to their successConversely, numerous athletes squander their talents through poor dietary choicesThis analogy holds true for many businesses that maintain unhealthy spending habits.

Companies must carefully evaluate which expenditures are essential and which personnel are crucial, streamlining financial and human resources to pursue higher fiscal and operational efficiencyIn both categories, there is often considerable bloat; items once deemed irreplaceable might turn out to be dispensable.

3. Asset Review – Reduce Leverage, Enhance Efficiency

In my experiences with traditional businesses, it has been common for many executives to boast about asset size, particularly when unfamiliar with their counterparts

However, any financially savvy individual will recognize that net asset value — total assets minus liabilities — represents the shareholders' equity.

Despite this, a trend persists where business leaders focus solely on asset mentions while neglecting liabilities, driven by two primary conditions:

First, as long as they can secure financing from banks, they perceive it as a sign of capability, assuming ownership of those assets as long as lenders remain willing to extend credit.

Second, during prosperous times, the return on investment (ROI) and return on assets (ROA) indicators are generally favorable, suggesting that larger asset volumes yield greater returns.

Yet, these two conditions have largely evaporated in today’s economic landscape:

Firstly, the current financial climate has made securing funds significantly more difficult, and capital supply has become exceedingly unstable

The demise of many companies can be directly attributed to insufficient financing, with previously celebrated firms like Royole and BYD facing the music.

Secondly, economic downturns have diminished asset appreciation potential, leading to rampant underutilization of previously acquired assetsIn reality, many companies were already overextending themselves during their asset acquisition phase, with current adversity merely serving as the moment of reckoning for those imprudent decisions.

Enterprises should take a rational view of market trendsIf the deterioration is evident, divesting non-core assets becomes necessaryThis strategic move not only reduces leverage to shield businesses from adverse financial conditions but also enhances operational efficiency by ensuring that core assets function at their utmost capacity.

4. Cash Flow Review – Cut Off Customers Lacking Long-Term Viability

While operating at a loss does not automatically spell bankruptcy, a negative cash flow can lead to a rapid downfall

Companies may exhibit profits on paper and possess manageable debt-to-asset ratios yet still find themselves unable to satisfy due debts or re-engage supply chains, ultimately leading to collapse—all in what is colloquially known as "profit bankruptcy."

The primary sources of positive cash flow arise from financing and operationsWhile financing has already been addressed, the operational cash flow warrants further discussionMany businesses continue to engage in product or service activities yet fail to receive paymentsThe usual culprit? Clients defaulting on payments.

Consider this: When starting a business, if a service is rendered but payment is withheld, what compels ongoing collaboration? Look at the case of an automotive company that allegedly owes a public relations firm millions in unpaid invoicesWhile an engineering firm would be expected to face such issues, public relations services encountering similar unpaid debts is puzzling

The crux often lies in the psychological manipulation of clients.

Picture a mogul adorned with a gold chain, flashy watch, and designer clothing dining with you, suggesting you foot the bill this time aroundWould you have the audacity to decline? The moment you show any reluctance, that influential figure might casually suggest they appreciate working with "generous and understanding" partners, inducing you to feel compelled to cover the cost instead.

However, appearances can be deceiving—those glamorous accessories might be nothing more than cheap imitations, and that luxury car could be leasedUltimately, they may engage in psychological subterfuge, perhaps even a Ponzi scheme designed to obfuscate their financial liabilities in favor of chasing future debts.

It is crucial to remember that the most valuable clients are those who offer long-term potential rather than fleeting opportunities