Five moves to make now
No one knows how long the economic downturn will last. No one even knows for sure whether we are in an actual recession (defined as two consecutive quarters or more of a declining gross domestic product) or merely a slowdown.
According to the April 2008 Small Business Economic Trends survey of small and independent businesses, the optimism index fell in March to its lowest monthly reading since the survey began in 1986. While some indicators pointed to a weaker economy (some businesses reported difficulty in obtaining credit), other indicators were not so negative (46% hired or tried to hire new workers, and 25% still plan to make capital outlays).
Whether or not we officially are in a recession, now is the time to shape up for bad times so that you can weather them well. Here are five steps to minimize the impact and ensure that your business survives…
1. Be nimble. Don’t lock into long-term commitments that you may not be able to meet. For instance, if you are moving to a new space, keep the lease as short as possible and make sure that you can sublease if you need to move before the term is up.
Even if it looks as if you need additional help, you may not want to take on a full-time employee at this time. Instead, consider using a temporary agency or engaging independent contractors when appropriate.
Keep an eye on your cash flow (monitor receivables carefully), which can be difficult for you to maintain if you have slow-paying customers who also may be struggling in this economy. Make sure you have lines of credit in place to carry you through difficult spots.
2. Cut costs. If you can’t boost sales to maintain profit margins, reduce overhead. This may be easier said than done in today’s economy, with inflation adding to prices on just about everything. Think of your business as a boat that needs to jettison everything that isn’t essential in order to stay afloat.
First to go overboard should be discretionary spending, such as business travel and entertaining. If you can’t let these go, opt for low-cost alternatives — economy air travel instead of business class, less costly restaurants, etc.
Also look at subscriptions and memberships when they come up for renewal. Which ones do you need to keep?
Use conservation measures to save on fuel. This summer, for example, keep thermostats a little higher and change to energy-saving lightbulbs to reduce electricity usage. Restrict business driving whenever possible to cut gas costs.
3. Keep marketing. If your current customer base isn’t bringing in satisfactory revenue, expand your horizons. For example, if you have a bricks-and-mortar store, consider adding an on-line presence to market to customers nationwide.
Diversification is key. You may need to expand your lines to attract a wider audience for your business. If sales are slow, you’ll have more time to devote to new products and creative marketing efforts.
Slow periods also may mean more time for you to network with other business owners. This will help you to build relationships now that can translate into more business in the future.
4. Cater to customers. Listen to what your customers are saying, and pay more attention to their behavior. In tight economic times, customers are more discriminating (especially when it comes to cost). More rely on comparative on-line shopping sites, such as Pronto.com, to find the best prices. They check Web sites before going to a store or buying on-line.
A growing trend is to rely on peer reviews (found on comparison-shopping sites) before making any purchases. How do you stack up against your competitors?
Some possible actions to expand on-line sales…
5. Use technology. Technology can help you do more for less money. In some cases, it requires an up-front investment for software, hardware and/or devices, but these will pay off in the long run.
If you have some downtime now, explore your options. These could include free on-line help for your business.