by C. Norman Beckert
Many small businesses continue to face the impact of the economic slowdown we’ve experienced these last few years. Economists have stated that the recession is over but many small businesses are not convinced. It is a known fact that individuals have cut back on discretionary spending and companies have curbed routine activities, continue to delay major purchases and have shelved new initiatives.
For many small businesses with limited resources, these and other factors often combine to pressure bottom lines past the breaking point, creating a domino effect of other dilemmas such as a credit crunch or layoffs.
A downturn doesn’t have to spell disaster for your small business. Good financial management practices will help you weather even the worst of economic times and be ready to capitalize on new opportunities that will inevitably come with the return of better times.
Begin with the basics. Even when times are terrific, no small business can survive without good record-keeping, budgeting, cash flow monitoring, and credit management.
Consult your bank. Lenders can tap their vast experience in economic cycles to advise you on issues specific to your business and industry. Reexamine your projected long-term expenses and modify them as appropriate. Depending on your projected long-term expenses, consider arranging a line of credit in case a cash flow gap occurs.
Be on good terms with your creditors. Falling behind on payments is never the answer, even if it’s “just this once.” Creditors will be more amenable to renegotiating terms to small businesses they consider to be conscientious and reliable. Creditors want you to survive in that you are a customer and you are vital to their success and growth.
Watch your receivables. By the same token, you need to stay on top of any outstanding debts to your company, particularly problem accounts. Be firm, but also willing to negotiate where appropriate. Consider the golden rule of treating your customers as you wish to be treated by your creditors.
Scrutinize your spending. Rather than arbitrarily slashing your budget, prioritize by spending only on those things that have a justifiable positive effect on your business. That will make it easier to redirect money to areas that enhance business performance. Make sure your thinking is “must have” rather than “nice to have”.
Step up your review of financials. Assessing your reports weekly or biweekly rather than monthly will put you in a better position to make informed decisions. Similarly, a monthly or quarterly review of your business plan enables you to adjust your strategy and direction to changing market conditions.
Keep marketing in the mix. Look for cost-effective ways to keep your company visible to current customers and potential new markets. They may be ready to restart their spending long before the headlines proclaim an end to the economic crisis. Talk to your key accounts and inquire about their operational plans. Are they “gearing up” and when?
Make a Marketing List. Make a list and keep it visible especially with marketing ideas. Set a goal of adding at least one new marketing idea every day. Not all of the ideas will be feasible but they may kindle another thought. Make sure your employees see the list and are encouraged to add to it as well.
Keep in mind that the above are suggestions. You, the business owner, are responsible for steering the ship through a safe course to survive the storm.