The recent economic downturn has challenged businesses of all sizes across the United States. Here are some battle-proven ideas to protect your company and shield your assets -- even in the most bearish of markets.
1. Revise your business plan
No matter how rational your current approach may appear, if you’re like most small business owners, you panic in the face of less than excellent market news. Work up a plan that optimizes inventory use, boosts sales, cuts costs where possible, and helps you audit your processes. You are not going to get everything “right” during your first pass, and will likely evolve your tactics as the economy changes. But by increasing your flexibility, you should have more options on the table to deal with crises as they emerge.
2. Tactical maneuvering aside, don’t give up on your core strategic plan.
There is a huge difference between tactical redirection (redoing your cash flow, moving inventory, etc.) and retooling the strategic raison d’être of your small business. Figure out your company’s “hedgehog concept” - the one thing your business can do better than any other company out there. Then hang all of your tactical efforts on this core idea.
3. Keep your employees apprized of what’s going on.
You’re not the only one feeling the pinch in your pocket book. Your employees are doubtless concerned about how the downturn will impact them. By holding meetings regularly, being realistic about your plans for the future, and answering concerns honestly, you may not necessarily boost morale, but you will prevent a poisonous climate of uncertainty from taking over your office. (This isn’t to say that you should invite your employees in on every key decision, however!)
4. Prepare for the worst.
The current recession may only last a few months, but you should have a strategic plan and cash on hand to deal with a much more severe downturn. The idea isn’t that you should avoid all risks, but rather that you should craft your strategies conservatively.
5. Search for new customers and new ways of doing business.
Scarcity can boost innovation tremendously. Look for ways to expand your brand, generate new zeal for your products, and otherwise shake up the game.
6. Pay attention to what other businesses like yours are doing to prepare.
Don’t be embarrassed to ask other (noncompetitive) small businesses in your market for advice. Sure, you may get some really terrible tips. But whether or not others offer up their 24 karat wisdom, simply by taking the temperature of your business community, you’ll undoubtedly develop better instincts for how to manage problems that come up.
7. Develop a more efficient cash flow system
Do you maintain an open credit line to take care of payroll? Do you stay in the black by paying this line down as invoices come in? Given the paranoia in the credit markets and potential problems with client creditworthiness, it may behoove you to tighten this system. Keep more cash on hand to meet imminent expenses, and make your cash flow less dependent on timely client payments.
8. Don’t necessarily abandon plans for expansion.
Just because the economy on the macro scale slows down doesn’t mean that your business needs to pause for the worst to blow over. In times of rapid economic growth or contraction, opportunities abound. Keep an eye open for new client opportunities that might open up as a result of the collapse of a competitor. Remember that the rules of supply and demand and the tenets of consumer psychology apply in both bear and bull markets.
9. Consider how your personal assets might be impacted by the economic slow down. Can you tighten your belt to help the company?
If you can cut your salary or return a car you’ve leased through the company, for instance, not only will this slim your budget, but it will also boost the morale of your employees. If you can sacrifice for the good of the firm, so can they.
10. If it ain't broke, don’t fix it.
Sure, economic hard times can and should cause you to reflect on how you are doing business, who you are doing business with, and where you are competing for customers. But you don’t necessarily need to switch up your infrastructure, business plan, or cash-flow system if it’s not causing problems or anticipated to cause problems. In fact, the fewer drastic changes you make, the easier it will be to focus on the changes that you do institute and ensure that they do more good for your business than harm.
1. Revise your business plan
No matter how rational your current approach may appear, if you’re like most small business owners, you panic in the face of less than excellent market news. Work up a plan that optimizes inventory use, boosts sales, cuts costs where possible, and helps you audit your processes. You are not going to get everything “right” during your first pass, and will likely evolve your tactics as the economy changes. But by increasing your flexibility, you should have more options on the table to deal with crises as they emerge.
2. Tactical maneuvering aside, don’t give up on your core strategic plan.
There is a huge difference between tactical redirection (redoing your cash flow, moving inventory, etc.) and retooling the strategic raison d’être of your small business. Figure out your company’s “hedgehog concept” - the one thing your business can do better than any other company out there. Then hang all of your tactical efforts on this core idea.
3. Keep your employees apprized of what’s going on.
You’re not the only one feeling the pinch in your pocket book. Your employees are doubtless concerned about how the downturn will impact them. By holding meetings regularly, being realistic about your plans for the future, and answering concerns honestly, you may not necessarily boost morale, but you will prevent a poisonous climate of uncertainty from taking over your office. (This isn’t to say that you should invite your employees in on every key decision, however!)
4. Prepare for the worst.
The current recession may only last a few months, but you should have a strategic plan and cash on hand to deal with a much more severe downturn. The idea isn’t that you should avoid all risks, but rather that you should craft your strategies conservatively.
5. Search for new customers and new ways of doing business.
Scarcity can boost innovation tremendously. Look for ways to expand your brand, generate new zeal for your products, and otherwise shake up the game.
6. Pay attention to what other businesses like yours are doing to prepare.
Don’t be embarrassed to ask other (noncompetitive) small businesses in your market for advice. Sure, you may get some really terrible tips. But whether or not others offer up their 24 karat wisdom, simply by taking the temperature of your business community, you’ll undoubtedly develop better instincts for how to manage problems that come up.
7. Develop a more efficient cash flow system
Do you maintain an open credit line to take care of payroll? Do you stay in the black by paying this line down as invoices come in? Given the paranoia in the credit markets and potential problems with client creditworthiness, it may behoove you to tighten this system. Keep more cash on hand to meet imminent expenses, and make your cash flow less dependent on timely client payments.
8. Don’t necessarily abandon plans for expansion.
Just because the economy on the macro scale slows down doesn’t mean that your business needs to pause for the worst to blow over. In times of rapid economic growth or contraction, opportunities abound. Keep an eye open for new client opportunities that might open up as a result of the collapse of a competitor. Remember that the rules of supply and demand and the tenets of consumer psychology apply in both bear and bull markets.
9. Consider how your personal assets might be impacted by the economic slow down. Can you tighten your belt to help the company?
If you can cut your salary or return a car you’ve leased through the company, for instance, not only will this slim your budget, but it will also boost the morale of your employees. If you can sacrifice for the good of the firm, so can they.
10. If it ain't broke, don’t fix it.
Sure, economic hard times can and should cause you to reflect on how you are doing business, who you are doing business with, and where you are competing for customers. But you don’t necessarily need to switch up your infrastructure, business plan, or cash-flow system if it’s not causing problems or anticipated to cause problems. In fact, the fewer drastic changes you make, the easier it will be to focus on the changes that you do institute and ensure that they do more good for your business than harm.
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