The businesses in the nursery and baby goods trade who are most likely to survive, whatever the economy throws at them, will be those who pay close attention to the health of their business, monitor their cash flow carefully and change their structure and what they sell to meet the needs of tomorrow's customers (rather than rely on what worked in the past).  

The first thing to do is to carry out a business health check to review the following areas:

• Your current activities, i.e. year on year performance based on targets and actual achievement - sales, profitability, margin, customer numbers and so on.
• Budget maintenance, overheads and general running costs, cash flow, credit control, your ability to borrow money, how much the business owes and is owed/owns.
• Customer satisfaction - what is the positive feedback and what areas are in need of improvement?
• Suppliers and their performance
• Products and services in comparison to other offerings - are you delivering what your customers want? Is your marketing effective?
• People and skills base - is there a need to train and up skill?
• Processes, procedures and equipment - is there a need to upgrade and update? Benchmark against your competitors where you feel it is appropriate.

One critical area is obviously maintaining a healthy cash flow so accurate forecasting is an essential business tool. Forecasts should be prepared for periods appropriate to the business, perhaps quarterly or annually in advance, and be divided into weeks or months, or even days in extremely difficult periods. Having established a forecast, be aware that it is dynamic and warrants regular review and adjustment depending on what customers are buying, payment patterns and supplier demands.

Incorporate warning signals into the cash flow forecast. For example, if predicted cash levels come close to overdraft limits, this should trigger an alert calling for remedial action to bring cash back to acceptable levels. Try to have a contingency plan to meet those short-term cash shortages.

Look after your cash

Get paid on time: You've supplied the goods or services but not been paid. It's your money and it should be in your bank account.

Pay on time: You will also reduce your risks by paying your suppliers on time, helping ensure your whole supply chain stays in the black.

Reduce your stock levels: Money unnecessarily tied up in stock is money that's not in your bank.

Get to understand your finances

What is your break-even point (profit margins)? How much of a cushion do you have? If sales/contracts don't make you much profit, even a small increase in costs or a tiny drop in turnover could push your business into the red.

Monitor cash in and out of your business on a daily or weekly basis - don't delay until your VAT Returns and annual accounts. Make good use of your bookkeeping or accounting software to generate reports that tell you how the business is performing now. Or start your own spreadsheet, using a pen and paper if that suits you best!

Know your gross margins

You should avoid chasing sales with a low profit margin, if the same effort will secure sales with higher profits. So, calculate the profit for every one of your products and focus your efforts wisely.

Be realistic about what you can change

Prepare an honest forecast of sales, profit and cash flow, and be brutal with yourself about what needs to change. Do this regularly, so you always know what's going on, and can respond quickly to possible problems.

Planning ahead, changing what needs to be changed and exercising stringent cash controls should help you not only survive but prosper.

Seek free useful advice

You don't need to go it alone. Business Link service offers free, impartial guidance and advice. www.businesslink.gov.uk/creditcrunch includes some great guides and tools to help you carry out your health check, manage your finances and reduce costs through improving efficiency.

You can also contact your local Business Link on 0845 600 9 006. Experienced advisers are on hand to help review the performance of your business, identify any weak spots that need attention, and draw up an action plan with you to help achieve your goals. They can also make you aware of specialist business support services available that meet your specific needs.