Small Business Survival Tips in a Weak Economy

Suzanna De Baca -- Expert Business Source, 8/5/2008 10:15:00 AM

While past history has shown us that down markets do eventually end and prosperous times return, a business owner has to keep operating.  With no economic relief in sight, at least for the short term, how do you keep your small business ahead of the curve?

According to a July 21, 2008 Sacramento Business Journal article entitled “Study:  Slow Economic Growth Ahead,” we’re in for more of the same weak economy -- for at least the foreseeable future.  The article cites a study by The National Association for Business Economics which reports that “45 percent of economists believe the economy won't log any growth or will clock in at a small 1 percent pace in the final six months of this year.”  The article states that thirty-two percent of respondents are slightly more optimistic, estimating that the “economy growth's during the second half could be between 1 percent and 2 percent.”  Only eleven percent of economists anticipate that growth will be 2 percent and 3 percent.

While slow growth is much better news than negative growth, it still poses challenges for your business.  Here are some steps you can take to protect your small business in the current economic environment.

Offer incentives.  If sales are slow, now is a great time to offer discounts, additional features, or special deals to valued customers.  Depending on your business, consider offering better terms to customers who pay in cash or who are willing to pay upfront.  While your margins may be squeezed, this tactic may increase sales.  If you offer these improved terms or incentives to special customers, it can also serve as a great way to strengthen relationships.  Your customers are looking ways to save money, too.

Increase your marketing.  I’ve said this in other columns, but rather than cutting your marketing budget, this is the time to either increase marketing or, at minimum, hold it steady.  If you’re like most small business owners, you need cash flow to get through a slow time – and marketing leads to sales.  Consider more outreach to customers in any way you can swing it;  if you can’t afford your normal advertising budget, think about creative ways to use the web, phone campaigns, or other promotions.

Hone your systems.  If you don’t have great systems in place to track revenues and expenses, put them in place now.  It is imperative that you know the reality of the situation so that you can be prepared to weather the next few months.  Meet with your accountant and get up to date.

Understand the economic health of your primary relationships. You’re not the only one experiencing a down market.  Your customers and your suppliers may also be going through a difficult time.  If you rely on one or just a few customers for the bulk of your revenue, research their economic health.  You can check their credit standing using online and other research resources.  The same goes for suppliers.  You don’t want to get caught off guard because one of your main relationships goes down.

Talk to your employees.  Again, I’ve mentioned in-house communication numerous times in Expertbusinesssource.com columns, but during an economic downturn everyone is skittish and hungry for information.  Put yourself in your employees’ shoes – they may be wondering how the company is doing, whether they are vulnerable to layoffs, or if the strategy for the next few quarters has changed.  Even if the situation is tight, being upfront with your staff creates and reinforces an environment of trust.  Your employees may have as many good ideas – or even more—than you do to deal with challenges.  They may see ways to cut costs or promote the business that you haven’t thought of.  Emails, conference calls, or newsletters can be a great way to send out messages, but nothing replaces face to face meetings where your employees can ask you questions directly and look you in the eye.

Keep your eye on the future.  Economic cycles are part of reality.  What goes down will eventually go up, so keep your attitude positive and your eye focused on the future. 

Suzanna de Baca is president of Private Capital Solutions Group. Securities offered through Broker Dealer Financial Services Corp. Member FINRA & SIPC. Investment Advisor Representative of Investment Advisors Corp., A Registered Investment Advisor. Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal or investment advice. Although the information has been gathered from sources believed reliable, please note that individual situations can vary, therefore the information should be relied upon when coordinated with individual professional advice.