Three winning strategies!
Whether it’s declining sales, increasing costs, decreasing cash flow, or a combination thereof – small businesses are feeling the impact of a down economy. With limited access to capital, the small business will not make it, and the small business owner’s lifestyle will suffer as a result. That’s the bad news. The good news is that small businesses can be much more flexible and reactive than big business. You can adapt to a slowing economy much quicker, and improve your odds of not only surviving, but coming out stronger on the other end. Here are three winning strategies to beat a down economy and protect your lifestyle:
1. Tighten your belt, Plan for Profit, and Optimize Cash Flow.
Tighten your belt. You are likely already doing this at home – eating out less, delaying major purchases, etc. Do the same in your business, take a hard look at last year’s financials, and identify what can be cut this year. Start with “luxuries” (coffee service, etc.), then turn your attention to paying less for the same (shop insurances, cell phones, etc.). Finally, take a look at what you can make do with less of – supplies, vehicles, and yes – even employees. Remember, the survival of your business is at stake here, if the company fails, then everyone is out of a job – including you!
Plan for Profit. After reducing your costs and freezing them, make sure your revenue level covers overhead to ensure profitability. It’s never a good idea to just let profits happen to you – but especially so in a down economy. Set a realistic sale’s goal, perhaps based on last year’s level – then see what happens if you reduce it by 10%, and 15%. Will you still make a profit? If not – go back to the cutting board!
Optimize Cash Flow. If you are going through tough times – it’s likely your customers are too, and that will be reflected in your accounts receivable aging. Have a consistent credit and collections plan – your first call should be a customer service call before the invoice is due, and another immediately following the invoice due date. Remember the squeaky wheel gets the oil. And despite your desire to increase sales, be very careful extending credit – do your due diligence first. Also, take a look at inventory, liquidate dead items and unfreeze your cash!
2. Differentiate or Die! As the economy shrinks, so does your market, and so does your piece of the pie. It is more important than ever to make your offerings standout in a crowd of look alikes. Why should customers buy from you, instead of your competitors? If you don’t know – just ask them! Compile and sort by the most common answers, as they say – the cream will rise to the top. The top reasons they buy are indeed what make you different – now get out there and shout it from the mountain tops. Use monies saved from cost cutting and invest in a marketing campaign trumpeting your difference. Companies that do this very well actually experience growth in a down economy!
3. Improve productivity & efficiency by increasing morale. Hard to do when taking away their coffee service, but what’s even scarier to your employees is the insecurity of a struggling company. Share with them your efforts to improve the business, solicit ideas for savings and revenue opportunities. It’s easier to accept losing their cell phones when the idea comes from them as a group. More importantly, it gives them a sense of control over their own livelihoods. If they help the company survive, they survive too!
In summary, it’s up to you. You can go with the bad news or the good news. You have no control over the bad news (the economy), but you do have control over the good news (your business) – so the choice is obvious. Implement sound financial practices, differentiate your offerings in the market place, and get your employees to help. Before you know it the economy will be re-entering a boom cycle and you will be uniquely positioned to prosper from it!
Mark A. Sandate is a speaker, author, and founder of MASSolutions, LLC – a business advisory firm specializing in small business growth. For more information, and to inquire about our workshops and/or a free business consultation please email MASSMyBiz@mas-solutions.biz.
