Read these “small business survival tips” to help your company thrive, no matter what it’s called.
You need to know how to keep your business afloat during economic recessions, whether you run an e-commerce site, a brick-and-mortar store, or a small local shop with 150 employees. If the cash flow in any company, no matter how big or little, begins to dry up, the finance department must be controlled like a “tight ship.”
You can and should take steps to safeguard yourself from making impulsive purchases. We’ve all made impulse purchases of things we didn’t need because we were in the mood, impressed by the flashy ad, or persuaded by the salesperson. Then we “wake up” a few days later to the realization that we’ve spent hundreds of dollars on something that isn’t crucial to the operation of our firm when other, more urgent needs were sitting idle, eating into our budget.
You can prevent “impulse purchases” if your company is incorporated and includes a section in its by-laws that reads: “All purchasing decisions over (a certain amount) are contingent upon approval by the board of directors.” Any large “impulse purchases” will require careful consideration; even modest ones could serve as a reminder.
When making a purchase, a partnership can say that the choice must be made with the input of all partners. In reality, the third party could be a business partner, a department head, or a vendor.
As a person, you have three days to reconsider a purchase and cancel it if you decide you don’t need it or can’t afford it, so running a sole proprietorship isn’t too stressful.
Don’t “short-change” yourself by avoiding expert assistance because you think you can’t afford it. This is especially true in an urgent situation. Skating on thin ice occurs when a commitment is made before all relevant information is gathered and all possible outcomes are considered and planned for. Seeking the opinion of experts before committing to a plan that could end in disaster is always a good idea, even if it comes with a price tag.
People seeking to sell you frills for your business require a “hard-nosed” approach, especially when sales are slow. Sure, when times are good, you could be interested in hearing about the latest and greatest in equipment or supplies. But if business is slow, avoiding the frills and focusing on necessities is best. However, it’s crucial to keep a kind demeanor so the salespeople will remember you as a friend and call again.
Your company’s books should express your philosophy with data generated by your standards. As a result, you should work with a third-party accountant or accounting company to compute your return on investment and inventory and accounts receivable turnover. Any part of the financial statement deserving of closer inspection during such an audit or survey should receive it. By keeping tabs on your finances in this way, you can likely spot any issues before they become noticeable before they get out of hand.
Advisory boards consisting of industry experts are increasingly common among startups. These groups, often called “power Circles,” are extremely useful for any organization but especially useful during low operating cash. Include a lawyer, CPA, club leaders, business owners/managers in your industry, and retired executives on your advisory board or power circle. Most persons you invite to serve on a board of directors advisory committee will be happy to do so.
After establishing your board, you should meet monthly to offer new information for critique. At each get-together, you and your advisors should discuss the challenges you’re facing in running your firm and provide suggestions for overcoming them. Your board of advisors should be objective, present you with counsel and options, and help you weigh those options. You don’t have to settle on anything formally during your board meeting or as a result, but you can certainly benefit from the ideas discussed.
Most clients can afford to pay you immediately, at least for a portion of what they owe you. It would be best to ask them why they are falling behind on payments so they may get caught up and your accounts receivable pile doesn’t get too high. If you make this practice a standard policy, your invoices will be pulled to the top of your clients’ unpaid bills. Be kind and respectful, but don’t be shy or too “nice guy” when asking for payment.
Establishing a solid credit history with regional financial institutions is another prudent move that few business owners make. A loan of $100 to $1,000 every 90 days could be a wise investment if you have a steady income stream. Borrow the funds, put them somewhere they’ll earn interest, and repay the loan in full a month or so before it’s due. Doing so will boost the value of your signature on loans and make getting emergency funding in need easier. You can use this as leverage in your firm to your advantage if and when your cash flow situation worsens.
Participate in regional and national trade organizations for your field. You may learn a lot about your industry and your competition through these groups, as well as learn about new products and services, market trends, and more.
You should proudly hang up your membership certificate and wall plaque in your workplace. Customers appreciate such “seals of approval” because they instill greater trust in your company.
Another item that’s often forgotten is that you should try to spend at least three or four weeks a year working side-by-side with your spouse in the business. Having a spouse familiar with particular persons and situations in your business is crucial if you cannot run the business yourself. Include your bankers, critical suppliers, and creditors, as well as your lawyer and accountant. While it may be inconvenient in the short term, the long-term benefits of having your spouse work in your business with you for four weeks per year will more than makeup for it. Dividing up tasks and allocating time equally is highly beneficial for couples.
Take advantage of free business coaching as often as you see fit. The Small Business Administration (SBA) has produced numerous helpful books, checklists, and pamphlets covering various industries. The U.S. Government Printing Office is your source for these books. You can find seminars cheaply or even free at local colleges and private organizations. You should use the banking and library resources available to you as well.
The key to successfully managing a small business is to always keep an eye on what the competition is up to, use sound financial judgment, and know where you stand about your goals. All of this will train you to anticipate and avoid future difficulties.
Whatever the state of the economy, if you want to keep your small business afloat, you need to do two things: surround yourself with knowledgeable people and always practice excellent business management.
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