Running a small business is tough. It requires hard and detailed work and many hours. It comes with serious problems and heavy responsibility. You need to be self-disciplined and persistent while putting your ego on the back burner and to survive an economic slowdown. This is during good times. If you’ve never been through a recession or a down economy, you’re in for a real surprise.
Despite all the drawbacks, I would rather be my own boss than work for someone else for a paycheck. There’s nothing like being in control of your own career and financial fate.
How do you stay alive during a recession?
You need to focus… Focus on the basics of running your business.
Staying Informed to Survive An Economic Slowdown
First…this slowdown should not have caught you by surprise. Newspapers and business magazines have been forecasting a downturn. The signs have been unmistakable if you know how to read them. Orders and projects have been placed on hold or canceled. Prices are being lowered to entice buyers and competition has become tougher.
Get into habit of keeping up-to-date regularly. Read the business section in your local paper, business magazines and or receive news through the Internet. Knowing in advance where the economy is heading, you’ll be able to adjust your business plans and prepare.
Cash is King
Understanding the cash flow of your business is critical. Cash flow is simply the money that continually goes in and out of your company. Your profit and loss statement and your balance sheet may show your profitable because it includes assets. That doesn’t mean your business will survive just because it’s profitable. It also needs to generate cash.
This is an area most entrepreneurs don’t like unless they are an accountant. Me personally, I hate this part too. Fortunately, I have a good accountant who takes time to help me understand my numbers. Twice a year we analyze together and identify which products and services have a higher profit margin, unnecessary expenses, the cost of acquiring customers, the effectiveness of marketing dollars and anything else to keep the bottom line “in the black”. I also review my books every month.
If numbers still leave you in the dark, I recommend the following books:
Finance and Accounting for Nonfinancial Managers by William G. Droms.
Any books by Robert T. Kiyosaki and
If you have a college near you, pick up a used book on small business management.
Cash Flow Strategies to Survive An Economic Slowdown
The most obvious – spend less but spend wisely.
Resist temptation to chop your marketing and advertising budget. A down economy is not the time to eliminate marketing dollars just wasteful marketing dollars. Competition is going to get fierce as customer spending shrinks. You need to keep your name out in front. Track your results and then cut unproductive efforts. More marketing dollars get wasted because they’re targeted at the wrong market. Know your target market and track your results.
Bartering is a great way to get goods and services for your business without spending cash. The barter must be a win-win for all parties involved. I have been able to grow my company and keep it solid using this method. Bartering is also an excellent marketing tool.
Ask for a deposit before starting a job for a customer. This will give you operating money while you are doing the job.
Stay on top of your Accounts Receivable and get invoices out right away. Also deposit checks and cash immediately. Don’t let them sit in your office.
Be conscious of where every dollar goes in your business. Don’t spend until your business is making the money to support the purchase. This is the No. 1 operating principle in this company. No Cash… No Buy. I keep the minimal operating expenses for the year on hand. Until that is met, there are no purchases.
When you make a purchase, ask yourself how is it going to improve your company’s bottom line. Will it help you operate more efficiently, increased sales, and or improve customer retention? I’d love to have a new computer but purchasing one isn’t going to help my company right now.
The dreaded “B” word…Create a budget.
An accounting program like QuickBooks or Peachtree will make dealing with figures a lot easier.
STILL LEAKING CASH?
Still operating in the negative? Look more closely at your business plan. Do you really have a viable business? Do really have a market for your product or service? Do you even have a business and marketing plan? For better or worse, a recession will weed out bad business models.
A down economy means survival of the fittest!
You will have to work harder and smarter. You must stay focused, targeted and get your message out effectively.
Do it right and you’ll find that you will be one of the survivors. Your business will be in a better position when the good times return.
And they will return.