| Making Smart Business Decisions in Uncertain Economic Times |
| Owning a small business is tough. Owning a small business in the last two years sometimes feels like you're running a never-ending marathon. Bank loans are all but nonexistent. Gasoline and commodity markets for even the basic business necessities like corn oil and paper goods are soaring leaving small business owners faced with the difficult choice of raising their prices in order to keep their doors open. But all is not lost. There are still concrete steps that can be taken to help keep your business viable while you ride out some of the most dramatic economic storms since the Great Depression. |
Don't Panic Keep a Keen Eye on Financial Reporting The best thing a business owner can do in times of serious economic shifts is to closely guard the business's finances. Creating reports that can compare sales, expenses and human resource expenses like salaries to the current year and month will help to gain a solid picture of activities and quickly highlight any serious shifts or fluctuations. Also be sure to check receivables and identify any delays in payment. If it looks like clients or vendors are stretching their payment terms, it may be time to pick up the phone and offer payment alternatives. Often the phone call alone helps to bring the client back on track and through the conversation you may learn other information that can help your business to provide better service or new sales opportunities. Remember where your sales come from. Ultimately, every business regardless of its products or services relies on its customers. For business to business customers, it's time to get out the customer list and pick up the phone. Talk with your biggest clients first and reassure them that your business is secure and well protected. For consumer based businesses, use online tools like email to build relationships and provide updates and special offers. Customers want to feel appreciated and special. Knowing their purchase history and preferences can go a long way to building offers and incentives that will capture their attention and ensure their purchases. Carpe Diem. You may think that's an erroneous statement, but think about the opportunities that make themselves available during tough economic times. Commercial property is readily available, making it a steal in some locations to rent or purchase. When competitors face hard times, you may be able to help them by purchasing a percentage of their inventory or if the worst scenario occurs and they go out of business, ask about acquiring their customer lists. Throw ‘em a Bone'Sometimes the best reason for a customer to buy is the ‘what’s-in-it-for-me’ incentives. Stores love to have buy-one get-one sales and all those magazine publishers can’t be wrong offering tote bags, umbrellas and sweatshirts to promote a 2-year subscription agreement. Sometimes it IS all about the free gift. Incentive programs can also help to move aging inventory, reducing your unused assets and adding significant cash flow at a time when cash on hand is critical. These items have significant worth and can tie up a company’s cash for weeks, months, and sometimes even years. Accurate records of all inventories including date of purchase, time on the shelf, and expiration dates, if applicable, will help to identify ‘slow movers.’ Remember to frequently rotate in-store displays to add interest and excitement to the products. In retail environments, presentation of product can dramatically affect sales. Even little moves like pulling items from the back of the store to the front or even from one display to another can boost sales and sell those lingering products. Cut Expenses That’s not to say that you should force your employees to work in near darkness or require them to wear three sweaters to work because you won’t move the thermostat above 25 degrees. Rather take a look at some of your expense line items and see if there are opportunities to cut or reduce those expenditures. Popular areas to examine include travel, client gifts, and salaries, but there are many other opportunities if you’re creative. For example, if you have a remote sales force, try holding online web conferences instead of flying the entire team to the home office for the annual meeting. For regular sales or conference trips, ask employees to help reduce costs by staying with friends or family and to travel off-peak times whenever possible. While budget cuts may be necessary, never cut corners on the level of quality and customer service your company provides. So many times businesses that are faced with economic hardships make the first cuts to their manufacturing costs dramatically reducing product quality. Customers will not be fooled by lesser quality or quantity and will not only stop purchasing your products but will loudly tell others about their dissatisfaction. Consumers will actually continue to buy products of higher quality and cost if they believe that the item will last longer or provide a longer return on the investment. Brand names with a solid reputation should never risk losing that position in the market in order to save a few pennies per piece. The cost to regain the customer and repair a damaged reputation will far exceed the cost to keep the customer and produce the item correctly. Be Positive It’s tough to go to work every day with a Dooms Day attitude. As the leader of your small business, your employees look to you for guidance and reassurance that no matter what is happening in the rest of the business world, things will be O.K. at their company. Start the day off right with a positive affirmation that you’re making the right business decisions and that even though times are challenging, you are prepared to guide your business and your employees through to calmer times. A little levity goes a long way to relieving stress. Try to have fun at work and even institute a few stress relieving days each month where employees will have an opportunity to have a little fun. Even a dress-down Friday or sports-themed day goes a long way to building good employee relations and keeping everyone calm and happy. The little amount you spend to keep employees happy will be returned to you in retention. Remember that the costs associated with hiring and training a new employee can run anywhere from one-third to one-half of the employee’s annual salary. |
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