By the time a company joins the ranks of the middle market, strategic planning should recognize that constant growth is an unrealistic goal. Burt Cabanas, who recently stepped down as CEO of Benchmark Hospitality Group, told the National Center for the Middle Market (NCMM) that his company would move several steps forward and then one back. Typically, the company would see "four or five years of growth followed by a 10-percent decline in a recession," then a return to growth.

That's fine in theory but scary in practice. Suddenly, a company can find itself on the ropes, and addressing personnel issues is likely on the short list. Layoffs are terrible for employees and can be painful for managers - not to mention detrimental to morale. Here are 10 tips to make your company stronger before and during times of trouble.

Manage your cost structure.

Private placement broker SecondMarket saw a big revenue drop - from $35 million in 2011 to a current estimate of $11.3 million, according to (part of Dunn & Bradstreet) - when its cash cow of selling Facebook shares disappeared after the social network went public.

The drop turned into a layoff in 2013. CEO Barry Silbert wrote, "I admit it, I screwed up." The biggest problem was treating "cash in the bank and top line revenue as the ultimate gauge of the health of the company," all while operating with a "bloated cost structure." The company moved to a more predictable business model, but it hadn't made the necessary cost changes.

Don't wait until changing conditions force you to meet an unrealistic cost structure head on. Undertake the necessary strategic planning now so that you have more flexibility (and fewer bad feelings) in meeting tough times tomorrow.

Remember tomorrow.

During the Great Recession, many law firms undertook layoffs because of dropping revenues and increased competition. Massachusetts boutique corporate firm Morse, Barnes-Brown & Pendleton did not. Instead, partners took a pay cut and instituted a wage freeze for everyone else.

The actions may have been inconvenient in the short term (who likes giving up pay?), but they were smart in the long run. When business began to return, Morse Barnes-Brown was in a better competitive position and could scoop up work that others were no longer staffed to handle. If layoffs are not imperative for the survival of the company, it might be wise to hunker down and capitalize on relative strength when conditions return to normal.


Even if layoffs are necessary, use the opportunity to reexamine all business processes and models. See if your company is working in an efficient manner - even if, unlike the SecondMarket example, costs seem in line. Tight operations mean a better use of resources and a lower chance that your company could fall into a roller coaster of alternating periods of growth and layoffs.

Consider furloughs instead of layoffs.

Shipping and logistics provider Primary Freight Services lost its biggest account in 2009 as a major recession took hold. With revenue down 21 percent year over year, some form of restructuring was necessary. The company wanted to protect employees and be prepared when business picked up again.

Instead of layoffs, CEO John Brown looked to furloughs, which can typically include reduced work hours and unpaid vacation time. Brown instituted a four-day workweek, which effectively created a 10-week furlough. He cut overhead by 13 percent and kept the employees he otherwise would have had to dismiss.

Borrow to keep key people.

If you conduct a layoff, keep in mind who you retain. In 1987, Benchmark Hospitality lost a major client. Cabanas couldn't afford to lose key people from that account who would be needed in the future. So the company went into debt to keep people onboard. It's not a choice for all companies; however, do a financial analysis to see what the cost of losing top people might be in the future. You might find that the debt service on a loan would be cheaper than lost opportunity and skills.

Avoid over-dependence.

The experiences of both Benchmark Hospitality and Primary Freight highlight the need to balance business intelligently through strategic planning. Too much dependence on a handful of major clients can be devastating. Not that you should say no to a potential large revenue jump when the opportunity presents itself, but quickly work to bring in other work to help balance the scales.

Monitor industry and economic metrics.

Companies spend a lot of time keeping track of internal metrics to monitor operational and strategic health. There are other sources of data, such as industry associations, market analysts, and governments, that can show company performance in the context of a bigger picture. The NCMM provides middle market companies with an interactive Performance Benchmarking Tool to compare their performance against industry peers based on five key metrics: revenue growth, employee growth, productivity, investment strategy and confidence in the local, national and global economy. Keeping long-term trends in mind can sometimes alert you to forces that might affect business in the short-to-mid term, giving you an opportunity to take action before the company finds itself in an emergency.

Collaborate with customers.

As NCMM noted in a white paper on supply chain management, bourbon distiller Maker's Mark announced that it would water down its products because of poor demand forecasting. In this case, it wasn't that sales were falling to the wayside but that they were increasing more rapidly than the company had planned for.

Irate customers caused management to rescind that plan. It's an object lesson in why working with supply chain customers to develop strong demand forecasting is important. Trends in business, whether favorable or not, can disrupt business as usual. Collaboration with customers can identify changes and give management enough time to react.

Consider strategies that allow easy scaling.

One thing Maker's Mark, Benchmark Hospitality, Primary Freight, and SecondMarket all had in common was not being adept at scaling their businesses up and down. Technology has helped offer some solutions. IT systems can be run in the cloud, increasing or decreasing usage as needed. Outsourcing some functions overseas or domestically (an inbound call center, for example) can let a company change its resources in short amounts of time without creating the internal stresses of laying off permanent employees.

Consider a turnaround specialist.

Making rapid changes in reaction to rough waters can be difficult. Consider whether a turnaround specialist who focuses on middle market companies might be a good ally. Even if your company is not in a desperate last stand, experts who regularly help companies rationalize their size will likely be aware of more ways to reduce spending and restructure for greater effectiveness.

All companies can face difficult times. With preparation, however, your business can emerge on the other side of the storm more quickly and in better shape than would be possible otherwise.

Erik Sherman is an NCMM contributor and author whose work has appeared in such publications as The Wall Street Journal, The New York Times Magazine, Newsweek, the Financial Times, Chief Executive, Inc., and Fortune. He also blogs for CBS MoneyWatch. Sherman has extensive experience in corporate communications consulting and is the author or co-author of 10 books. Follow him on Twitter.