Surviving the Slow Times: How to Weather a Stormy Economy

 

Slow times require fast thinking for small business owners. Since smaller companies typically do not have the financial resources to weather dry periods as effectively as a larger company can, it is critical to move quickly when business shows signs of slowing down. The time for action is at hand for many small businesses. As a business owner, you have a choice in terms of how you view a slowdown. It can either be a time of frustration, stress and panic, or you can approach the situation as an opportunity to upgrade your business processes and put new initiatives in place to enhance your efficiency and weather the downturn.

Trimming the Fat

When the economy slows, an initial response by many small companies is to cut back on areas that are considered non-essential because they may not have a direct impact on sales or profits.

Although cutting back is an easy way to save money, many experts agree that slashing budgets for items that are commonly targeted when business is sluggish—such as advertising, employee training and business travel —is precisely the opposite of what a company should do during slow periods.

The key to making budget cuts is to carefully evaluate each area of your business and identify those that are not as efficient as they could be. You also should re-evaluate your suppliers of insurance, telephone service and other business services to ensure that you are getting the most for your money.

Bringing in New Business

While it is questionable to cut your marketing budget during slow periods, it is a great time to refine and improve your marketing program to generate better—or more targeted—results. You can start by revisiting your marketing plan and adding new initiatives to help bring in business:

• Follow up with existing customers. A business slowdown is a great time to get in touch with established customers to find out what needs they have and to remind them of your capabilities.

• Offer something free. Promotions are a great way to attract new prospects. Consider targeting prospective customers and offering them a free consultation or a free sample of your product or service.

• Create an e-mail survey. Send out an e-mail survey to your customer base and ask them about the biggest issues they face related to your field of business. Compile their answers and prepare a brief report on the results. You can publicize the results on your Web site and leverage the report as a basis to set up a meeting with prospective customers.

Making the Most of Your Cash Flow

When business slows, maximizing the effectiveness of how you manage your cash flow can be critical to the survival of your business. Here are some areas where you should focus your attention:

• Accelerate the collection of payment. You can improve your cash position by streamlining systems for collecting payments with merchant services, remote deposit and other treasury management services.

• Improve processes for making payments. Consider using online bill pay services to reduce the time and costs involved with paying your bills, as well as online payroll services to make tax payments more efficiently.

• Invest your excess cash effectively. Put it to work in a business money market account or certificate of deposit.

• Explore solutions for cash shortfalls. Establish a business line of credit you can access in case of a cash crisis, as well as to take advantage of unexpected opportunities.

• Use online information reporting tools.

Position Yourself for Profitability

Use the slow periods as an opportunity to make improvements in the way you manage your business. This will help you weather the stormy economic conditions, and you’ll be well-positioned for more profitability when economic conditions turn brighter.

This article is reprinted with permission from The Family Business Report sponsored by the Goering Center at the University of Cincinnati College of Business Administration.