If you are a small business owners you need to stop worrying so much about the economy and start looking for ways to become optimistic about your business. The down market is part of an economic cycle during which you must continue to operate. The good news is that small business is what drives the economy. As you become stronger, so does everything else. During this season, why not focus on planting those seeds that will allow your business to reap the benefits of the next economic harvest?
To survive this cycle you need to focus on keeping your cash flowing. This means focusing on sales, reducing costs and managing your credit.
• Sales. Perhaps the most important action you can take to strengthen your business. There is a limit to cost-cutting. Not with sales.
o Identify 10 strategies to get your existing clients to buy more often (provide more value, improve customer service, make it easier to purchase).
o Identify 10 strategies to get you existing clients to spend more during each purchase (new products, improved versions, up-sale, bundled goods).
o Identify 10 strategies to get more prospects in front of your goods or services (new products and services, new markets, improved repackaging, test and measure your marketing efforts).
o Develop a unique selling proposition, guarantee or other value proposition that moves you into a niche and away from the pack.
• Cost reductions. Here are some possible strategies to cut cost and raise margins:
o Declare a 10% overall expense reduction strategy. Reuse paper or printing on both sides; reduce the number of light fixtures; install "timers' for lights; turn off computers when not in use, change phone plans or carriers; reduce number of land lines; consider voice over IP;
o Get rid of “C” “D” and “F“ clients. Be aware of Pareto principle- 80% of the profits of your business, usually comes from 20% of your customers. Sort customers from A to F; "A" being those that pay early, do not complain and refer new business. At the other end of the spectrum are the C’s D’s and F’s; those that demand and complain often, are price sensitive and pay late. Letting go of these clients will allow you to focus the ones that help your business prosper.
o Increase productivity without hiring more people. Employees are also worried. Are you taking time to listen to their concerns? Are you providing counseling or assistance? Statistics show that workers who feel that their employer cares about them are more productive in the workplace.
o Look for efficiency while monitoring and limiting unnecessary accrual of overtime and other fringe benefits. Avoid costly turnover (unemployment, severance pay, hiring and retraining costs). Be more selective and thorough when hiring; use assessment tools and profiles to get the right person for the job.
• Credit. Banks are not borrowing so, you need to protect your flow of cash:
o Be selective with credit and do not put off sending your invoices. Why wait to the end of the month? Double check them to avoid inaccuracies that could delay payment; reward those who pay early, include charges for late payments. Do not delay collection efforts; the longer it takes the harder will be to collect; and it’s probably a C, D or F client anyway.
o Negotiate better terms for your payables. Examine for recurrent or automatic renewals.
o With the credit crunch, you need to start applying now for a line of credit before you actually need one.
