Keeping Your Business Strong 
In An Uncertain Time
 

Published in Home Business Connection Winter/Spring 1991

In 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.

There 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

ONE Right now, examine the finances of your business carefully. Look at present and projected cash flow, as well as profitability, and consider the suggestions below.

Aim to improve cash flow, and build up a cash reserve, separate from your working capital. Examine each expense carefully by asking yourself four questions:

  1. Is this expense absolutely necessary?
  2. Is there a less expensive, yet satisfactory alternative?
  3. Can this expense be delayed?
  4. What will be the effect of these decisions?

Your 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.

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.

TWO 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.

THREE 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.

Use 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 your business.

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.

FOUR  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 the consumer.

As 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.

Taking 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