When the economy slumps, many small business owners look for ways to cut costs and maintain profits. They constantly review key measures, including their financial situation, cash flow, revenues, hiring and credit availability.
Strategies that work well enough to get you and your small business through short-term slumps often aren't as effective with long-term challenges. So what more can you do to make sure your small business survives? These tips may help you survive and even thrive through tough times.
Focus on your core business. Concentrate on what you know best and resist the temptation to detour into other areas. Think twice before pursuing your neighbor's "can't miss" investment opportunity. Grow your awareness of what's working for your business and your market, and find where the gaps are. Your key opportunity likely exists in your core business.
Focus on the customer. Customers are assets invest in them constantly. The more you know about your customers and the more they know about your products and services the greater your opportunity to build relationships that will grow your business. Every contact is an opportunity to increase sales and profitability by expanding your business with your best customers. Each time you talk to customers, let them know how your company can benefit them. Exceed your customers' expectations by demonstrating your understanding of their needs and concerns.
Get to know your banker. Even in challenging times, your banker can be your most important financial resource. In addition to offering a wide range of financial solutions tailored to your business needs, your bank offers another essential benefit: a productive, ongoing relationship that can work to your financial advantage. The earlier you discuss your current financial situation and your expectations for the future, the more value your bank can provide. If your banker knows about potential financial risks, he or she can help you avoid them.
Maintain your financial flexibility. Monitor your financial statements carefully and make sure you understand your sources of revenue and expense including your investments in receivables and inventory. Remember, cash flow is king and businesses that carefully manage it have a better chance of survival and success. Look for a bank with Internet tools such as online statements and spending reports that allow you to monitor expenditures in "real time."
Stay financially light on your feet. Grow your savings and investments to maintain equity and liquidity. Every industry experiences downturns, so it's essential to have enough liquid assets to help you weather those times. Good businesses take advantage of economic slowdowns to grow market share.
Grow your technology and resources. Seek resources that can speed and refine your ability to deliver value. Think of technology as your virtual work force. For example, you can use the Internet to tap into talent that can expand your capabilities without increasing your payroll. Shop around for the right online solutions and use them to improve your customers' experience and make your business more efficient. The Small Business Administration has excellent online (www.sba.gov) resources and information, as do other small business organizations. Also, check with your bank. If it is solidly committed to its small business customers, it will offer access to the full realm of services like payroll, retirement, online banking, bill payment and merchant services.
Hire and retain good people. Your employees are your most sustainable competitive advantage. Your competitors can copy your technology and products sometimes virtually overnight yet they can't copy talented, dedicated and caring people. Hang on to your good employees in tough times; you'll need them then and for when you're growing again.
Hire a diverse staff. If your employees reflect the diversity of your markets, they will be more attuned to signals from the marketplace and allow you to respond quickly to changes in customers' needs and preferences. They can also help grow your business with new diverse customers.
Maintain your entrepreneurial spirit and flexibility. Agility is a key strength for small businesses, and it's important that you continue learning. Keep an eye on what other companies are doing. When they change strategies, there's probably a reason worth noting. Look at the direction larger and successful companies are heading and try to adopt or respond to their best practices.
Build a team of advisors. Your banker, attorney, CPA and other successful entrepreneurs can be valuable allies and help you identify resources and solutions to help your small business grow.
These are tough times but opportunities remain. Tough times force us to think of better ways to reach our goals. By keeping a close eye on your business and your markets, remaining agile and following sound management practices, your small business can survive and thrive while the economy improves. In fact, tough times can be an opportunity to create a stronger, better small business.
Chad A. Osorno is the regional president for Wells Fargo in northern Nevada. Contact him at 689-6118.