Your Business Strong
In An Uncertain Time
Published in Home Business
Connection Winter/Spring 1991
the last few weeks, I’ve had an unusually high number of calls from clients
asking for help to keep their businesses going during the lean times they see
coming. Given the current uncertain economic climate and the fears it arouses,
there is no better time to plan your strategy to keep profits and revenues high.
Small businesses, and particularly home-based businesses, are more vulnerable to
economic swings but they have a great advantage over larger businesses:
flexibility. There is no time-consuming bureaucratic process to go through when
making a decision, fixed overhead is lower and small businesses are in more
direct contact with the market. When a downward trend is felt, the small
business can react quickly and change tactics in relation to cash flow,
marketing and other critical areas.
are several things you can do to strengthen your business and take advantage of
the flexibility you have. These steps can help you survive a recession, but
probably will be beneficial no matter what the economic climate. Some of them
may be familiar to you, and perhaps you’ve been thinking about doing them, but
just thinking about it is not enough
Right now, examine the finances of your business carefully. Look at present and
projected cash flow, as well as profitability, and consider the suggestions
to improve cash flow, and build up a cash reserve, separate from your working
capital. Examine each expense carefully by asking yourself four questions:
- Is this expense
- Is there a less
expensive, yet satisfactory alternative?
- Can this expense be
- What will be the effect
of these decisions?
goal should be to cut expenses to the absolute minimum without harming the
business, and to hold on to funds as long as possible to get maximum use from
them. Your decisions can prepare you for what might happen and to plan for it.
is also wise to tighten up on collections, and to be sure your accounts
receivable are up to date. The longer you wait to collect, the more unpleasant
and difficult it will be. Be sure that you bill and review your accounts
receivable on a regular basis, and contact late paying clients as soon as you
realize they are late.
Update your business plan, and prepare one or more contingency plans in case
business does take a downturn. Don’t expect the downturn, because expectations
have a way of coming true, but be prepared just in case. You may want to prepare
for several revenue levels, or for any other occurrence that could affect your
business, on a “what if” basis. You are then ready to swing into action
immediately if there is a problem.
Market more intensively. This does not have to mean more advertising but rather
a greater effort on your part to be more visible and network more intensively,
at the very first sign of a business slowdown. This will not tie up your cash,
but will keep you active and creative, working to bring in new business.
your spare moments -- and if business is slow, you may have more spare time --
to make cold calls, renew existing relationships, send more information packets
and cultivate the relationships you already have. Attendance at local business
networking events may bring you some new clients, or a new idea to revitalize
This is also a good
time to try a new marketing approach, but on a limited basis so as to minimize
risk. Track expenditures and results carefully, and try out the idea for a
limited time, then evaluate it. The key is not to abandon your present marketing
plan if it is working well, but to expand it inexpensively. Perhaps approach a
new target market, or try a different type of sales tactic. If you enjoy public
speaking, then perhaps give a seminar or talk to a local group. Precede it or
follow it up with a press release, which makes you visible as an “expert” in
your field and may stimulate more business. When consumers are wary of spending,
they will tend to buy from a known source.
Diversify the products or services your firm offers. Here again, the key
is to try something inexpensive and low risk, and to track expenses and results
carefully at regular intervals. Often the business owner has been thinking of an
idea for a while. Usually the best tactic is to add something related to what
you already sell since you already have expertise and experience in that field.
A broader based product line makes you less vulnerable to economic cycles, and
is an additional reason for consumers to buy from your firm. Often it is easier
to add a service than a product because the initial investment may be less, and
there is no inventory. An added service may enhance the value of your product to
a business owner, the state of the world and the economic situations are not
always within your control. However, you can make a difference in the strength
and health of your business, so that if functions more profitably and
efficiently no matter what happens on the outside.
Care of Business, Inc. located in Columbia, Maryland offers personal financial
management services and small business consulting, specializing in new and home
based businesses. Lisa M. Berlin is President and can be reached at 410-730-6062