I'm lucky enough my business is very small. We're pretty much closing up shop. We're going out and getting regular jobs to weather the economic storm. But then again we have the luxury of doing that because with business poor as it is we can do what work comes in in our spare time and pick up a few extra dimes that way.

Larger businesses I realize won't be able to do that. The key I think there is to cut back on costs and push back any ad campaigns or attempts to expand your company. This is not the best atmosphere to try to sell someone anything. Consumer-driven businesses are going to be hurting, but so are to-business companies. Everyone is trying to cut costs and stay afloat. The best you can likely do is follow suit.

Refuse to Fail

I completely understand that some people are either not in a position to save their business, or that perhaps they are doing so well that it's not worth their time to rescue a business hurt by the economy.  However, I have put so much of my time and money into my projects that I decided I must find a way to "succeed".  If my "success" is extremely tiny compared to my projections when the economy was strong, so be it, but surviving through the hardest of times would be a huge personal success for me.  I also feel like strategies I learn during these trials may serve me very well in the long run.

"Be Greedy When Everyone Else is Scared"

I am taking advantage of a strategy that stems from this famous quote by Warren Buffet. While he manages a multi-billion dollar investment company, and I am practically invisible on the financial scale, the strategy still makes sense to me.  I will make any investments I can conceivably afford to make, provided I am getting a great deal because of the economic downturn.  For example, I was able to purchase new hardware that would otherwise have been out of my price range thanks to agressive pricing across the board.  Another company was going out of business locally, and I was able to purchase yet more goods at a discount from them.  As long as I keep my eyes peeled for bargains such as these, the net cost of doing business for me in the long run continues to decrease.

Diversification

I continue to look to our new government for signs as to where large federal investments may be headed, so that I can focus my business diversification into areas most likely to have fresh cash injections in the new year. However, that doesn't mean I'm looking for a handout, I just want to position myself in line when new contracts are up for bids.

Harsh Reality

If I didn't do these things, I would definitely be going out of business.  Rather than simply give up with the shortage of existing customers, though, I continue to test the waters in different markets to make sure that I can capture whatever business remains.  I was recently able to setup a big showcase that required a long commute, but it was a showcase nonetheless.  While I would prefer to have a showcase here locally, the fact that I was able to hustle and get one at all shows that opportunities are still available to the determined small business owner.

New Loan Options and Business Partners

I am intrigued by the idea that there may be new loan options on the horizon for small business owners as a result of a new bailout plan, but I am not counting on them.  Instead, I am working to create business plans so that I am prepared should these loans be made available.  If it turns out that they are not available to me for any reason, I may be able to partner with someone who can get the loan and make things happen anyhow.  Thus, my personal network of business relationships has never been as important as it is today.

Minimize Overhead

If I can drive home only one point, that point would be to reduce overhead however possible.  Businesses that can keep costs to an absolute minimum should be able to survive on a very small income stream.  For businesses that have to have a large inventory, I would recommend liquidating that inventory in phases online so that the bottom line looks better, and so that additional months of that higher overhead are curtailed.

My own small business story is just starting back up after being placed on hold for two years. A partner and I formed a personal organizing business in a small city in Florida, and despite our best networking efforts, not enough people were willing to pay for our services to make the business viable. Ironically, because it technically operated in the black, we held onto it for a long time, hoping that we were approaching the "hump" past which our sales would pick up momentum, but eventually both of us were deeply in debt because we were using credit cards and loans to pay our personal bills. I've spent a long time since then trying to figure out if we could have done anything different, or if we should have held on just a few months longer. But the thing that probably hurt us the most was the market - our prospective client base was too small and didn't have enough disposable income to drop a thousand (or two) dollars at one time. We could pick up jobs here and there, but not enough work to make a living.

Since then, I returned to the industry I have the most experience in - administrative work. I can make a regulated income to ensure my monthly expenses are covered, and taxes and insurance are far simpler. But I miss several aspects of having my own business, and recently when my car began to show signs it was time to replace it, I realized I was going to need to get a second job. After considering several possibilities, I decided I was going to start up an organizing business by myself. I face a lot of the same challenges as before, because even though I am living in Tennessee now, the city is only marginally larger, and the average income is most likely marginally lower. But I'm going to leverage my previous experience, and am able to accept whatever level of business comes my way because I don't need the business to meet my personal expenses.

One of the first things I've done is contacted SCORE. We used them before in Florida, and whether you're just forming your business or if you've been operating for some time, this organization can offer you free advice and counseling for your small business. There may be regulations or even incentives in your area that they can clue you in on, and just in general it will be helpful to have a person to whom you can ask questions instead of relying on local government websites that are often difficult to navigate or have outdated or incomplete data. Of course results will vary, so ideally you'll be utilizing multiple resources.

Word-of-mouth recommendations are truly the small business's best friend, because paying for advertising has mixed results. The most effective advertisements have one thing in common - people see them several times. So unless you're willing to spend enough to run an ad in successive circulars or multiple places, I would recommend concentrating your efforts on getting people talking about your business.

We previously belonged to the chamber of commerce, which is helpful in gaining networking contacts. The people we met through our membership brought us business well above our costs to join. However, this time around I am following a strategy of zero debt in the business, so I will not be paying the $300+ membership fee. Luckily, most chambers sponsor networking events that are open to anyone - members receive a discount, but tickets are reasonably priced for all. This will also enable me to visit events held by more than one chamber in my area. If you can afford to join, there are other perks offered as well - for example, discounts on advertising in participating newspapers or other promotions as the chamber chooses, plus discounts that chamber members offer to other members. You can also choose to offer a discount yourself, to encourage other business owners to give yours a try. One of the best ways to get results from networking this way is when those business owners recommend you to their clients - anyone not directly in competition with you is a potential asset.

Also, never forget a client. They are resources in many different ways, from repeat business, to word-of-mouth advertising and testimonials, and even to critical feedback. Think about ways a client may use your business at different times - for example, we promoted our organizing services as useful to people with New Year's resolutions in December, then in February we started a "spring cleaning" campaign. We always urged satisfied customers to pass along word to their friends, families and coworkers, but we also asked if they could write a letter of recommendation or allow us to use their names and photos of their projects on our websites and brochures. And because this kind of service involves working directly with clients in very personal settings, we always encouraged them to let us know how they felt about the entire process. Sometimes even when you can't satisfy a customer 100%, you can use this chance to mitigate their more unrealistic expectations, or at least learn how to avoid that kind of misstep in the future.

Because word of mouth is completely unregulated, I also offer free consultations. In my previous business, we began by charging for consultations, but our phone began ringing much more often when we changed over to free. So, although this will take up my time without generating any income unto itself, it will get my foot in the door when people otherwise might feel unsure. Then I can impress my prospective clients with my professionalism and expertise, as well as get a look at their specific needs so that I can offer each client a customized proposal.

Another way to raise awareness of your business is to give talks or submit articles to small newsletters. I plan to visit retirement villages and speak to seniors who are struggling to fit a lifetime's worth of dear possessions into a small apartment. I will also offer to contribute content to newsletters distributed by the management of apartment complexes. I also plan to speak at neighborhood association meetings. Along with the talk or article, offering a coupon, even at only a slight discount, can also create more positive associations with your business, and raise people's motivation to give you a call.

Careful accounting is integral to the running of any business, and the small business must especially keep track of all expenses because there is so little wiggle room. For example, to offset free consultations, I will scrupulously expense out my mileage (but note that my time is not claimable). Because my county assesses a real property tax, I will claim my computer and certain other office supplies as a deduction (this requires some research and/or consultation with a tax preparer to be done properly). Be aware of the differences between a sole proprietorship, a partnership, corporations, and other possible business formations - each of them have pros and cons that could make a big difference in your taxes and personal liability. For example, my previous simple partnership proved to have the most complicated tax reporting of all, and since we were unwilling to pay to have a professional prepare our taxes, I spent a good number of hours slogging through the federal tax code. But if my current sole proprietorship proves too complicated, I will consult a tax preparer and preserve my precious time.

One of the double-edged swords of small businesses is how much one can differ from the other. But resources are readily available no matter how unique your good, service or business structure. The best general advice I can offer is to get online and look up SCORE, the Small Business Administration, your local government website, local chambers of commerce, and any professional associations in your market.

While my strategy is changing, the "change" is only in the sense of being something I am clearly striving for. While the current political situation, in a way, doesn't matter to me, it actually was a "stimulus" to concentrating on what I am really doing.

My primary "change" is that I am much more sensitive to an outside view: does my business really make sense, as viewed by others? In an honest attempt to find out, I am unintentionally "recruiting" clients - that is, my purpose is NOT finding clients, but the questions I ask to help ME understand what my business SHOULD be is intriguing to the people I ask! Further, the answers I get are guiding me to improvements!

Another "change" is that I am, now more than ever, PASSIONATE about my business. As I see the suffering our system has inflicted on others, I am EARNESTLY trying to do my part, not just to make money, but to improve my part of the world, tiny though it may be!

Result? I am more satisfied with my work, my clients tell me they are VERY satisfied, and I actually feel I am making a part of the world a better place for everyone!

For us the economic downturn is an opportunity. We have always contended that there are two ways that we deliver value: skills and creativity. These days we are adding one more - cost control.

I have always marvelled how companies will assign internal resources to a project and watch it stagnate for months on end with nary a word about the cost, both actual and opportunty And yet, when we enter the picture and produce a proposal with definite objectives, timelines and costs - the conversation invariably leads to cost concerns first. It seems many organizations are comforted by the idea of a "full time employee" or "internal project management" even despite the fact that neither may be efficient nor deliver results. Just having the resource in place or the project on the books seems to be enough. But I think the economy is about to change this - and this is our opportunity.

Being primarily a project based organization, our proposals always have three definite and clearly defined things: deliverables, timelines and costs. As organizations everywhere thin their herds - more and more people will find their plates filling up and more and more managers will be under pressure to deliver results on time and on budget. Our job is to send the message that delivering on time and on budget is not a goal for us but a daily expectation.

In the coming months we will spend every available hour and dollar getting this message to our market. I believe that there will be more eyes and ears than ever straining to hear our message. People and organizations with a track record of accomplishment will be in very high demand. It simply makes sense that when folks are working with a short stack - they'lll be looking for a sure bet.

New Year is for resolutions, and small businesses are going to have to do some evaluation and make some resolutions to survive and thrive in the current economic crisis.  USA.gov  has a list of popular new year resolutions which suit the individual as well as the small business owner.

Lose Weight: Slim down your business by focusing on products which are core to your business and eliminating those that are not consistent with this. This may also mean scaling back existing products or developing new products scaled for an budget conscious customer and evaluating necessary personnel.

Get educated: Take advantage of slow business times to get more training.  Attend conferences, participate in webinars or just plain read.  Developing your industry specific skills, business acumen or studing your competition will help you survive the current financial crisis and prepare for the economic recovery .

Reduce Stress: Reduce the stress on your business by outsourcing.  Are there aspects of your business that could be done quicker, easier, and cheaper by someone else?   With the mass layoffs happening, there are plenty of skilled freelancers out there looking for some work.

Volunteer: Getting your business name in the public eye doesn't need to cost alot of money. Participating in community events and activites can be an effective way to increase your profile and garner good will with the community.  Encourage staff to participate in events, sponsor and outfit them for the event whether it's a charity walk, building a house or community fair.

Manage Debt / Save money: Keys to surviving in the new year will be to effectively manage your cash flow. Limit inventory  to reserve cash and credit line.

No one knows what 2009 will bring for small businesses.  They will have to make some hard choices and act sooner rather than later if they are going to survive the new year.  Unlike alot of resolutions, not keeping these could mean the end to a business in 2009.

In my opinion, the current "financial crisis" that we have been dealing with this last year is also one that we will continue to deal with for at least another full year, and perhaps beyond that.  There are ways for small business owners to navigate their businesses through these tough business conditions, and stay afloat under very dark, murky waters.

"STRATEGIES I HAVE IMPLEMENTED FOR MY SMALL BUSINESS THIS YEAR; AS WELL AS INTO NEXT YEAR"

My approach has been a very simplified one that is a "Back To The Basics" approach that involves focusing on the "key aspects" of my business's performance.  First, and foremost in my opinion is to re-evaluate the foundation for which my business was created for in the first place, and that is easily described by the following motto: "PROVIDE THE BEST CUSTOMER SERVICE."  Based on my experiences in the business industry, I have come to fully understand that "good businesses are built around great customer service."  Even in times of uncertainty which we all face currently, providing great service will bring customers back.  It is vital to focus on servicing your "loyal customers" instead of trying to be allthings to all people.  Great customer service means you should always look for ways to improve.  The first place to look for these ways to improve can simply be done by canvassing your current customers for "feedback," and react to it in a timely fashion.  The next step that I feel is necessary is that of focusing on "innovation."  I do not mean this is a time to come up with brand new business ideas, but I do feel it is a good time to simply do things better.  By consistently looking for ways to innovate that will add "VALUE" to your existing business, will help you survive in the long-term. This step of innovation should not involve anything that remotely resembles any type of risk taking.  Right now is not the time to enter into anything that involves taking a "risk."("avoid risk taking")   Even though I believe firmly that running a successful business and risk-taking go hand-in-hand, now is not the time to do anything too outlandish -- unless you can see a major gain or can do it without having to rely on credit. 

Another vital simplified approach is one of evaluating and addressing your "company's fundamentals."  A good place to start would be to ask how strong was your business plan to begin with?  Take a fresh look at your monthly expenses and income.  Are you meeting your projections?  How much of a hit in income could you manage?  And for how long?  These are financial numbers that you must know!  If things do get worse, your solid knowledge of your "business fundamentals" (not projections, but realities) will be key in finding your way through these tough times we  are in.  It is important to build a "contingency plan" now

 

There is an old joke about two campers who stumble across a bear in the woods.  Angered at being disturbed, the animal runs headlong at the campers.  The campers turn and flee.  The beast shows no sign of giving up the chase, so after a while one camper worriedly says to his pal: “I don’t think we can outrun this bear”.  The other says: “I’m not trying to outrun the bear.  I’m just trying to outrun you.”

Almost all markets have turned bearish of late.  How should the small business react?  Not panicking is a good start.  However gloomy conditions may seem, they will be gloomy for competitors too.  Downturns are the economic equivalent of Darwinism – a test where the fittest survive.  The primary goal is survival, especially for small businesses that lack a deep well of resources to help ride things out.  The secondary goal is living well, keeping strong and gathering the resources that will improve the chances of surviving any unforeseen problems that lie ahead.  Surviving hence means having a keen focus on all the advantages and efficiencies that may seem small in scale, but could make the crucial difference between the business that fails and the business that survives to enjoy the eventual recovery.

 

Staying One Step Ahead of the Bear

A good place to start is with some cold hard calculations.  What does your business need to do to survive?  Forget profits for the moment.  Cash is the lifeblood of a business.  Businesses disappear for the lack of cash, not for the lack of profits.  Think about cash, where it comes from, and where it goes to.  Think also about reserves of cash the business can draw upon.  Identify what the business needs to do to make the cash that will keep it alive for a month, 3 months, 6 months, and a year.  If things get really desperate you may need to shift timescales to weeks or even days.  Do not spend so long playing with numbers that you forget to actually run the business, but make sure you know what the cash targets are and keep them up to date as time passes and circumstances change.  Replace any existing business targets with cash-oriented versions of them wherever possible.  For example instead of paying commission to salesmen based on taking an order from a customer, pay commission based on the receipt of payments from the customer; this will encourage people to prioritize the best payers.

Once the cash baseline is understood, identify every opportunity to lower the baseline or make it more flexible.  Identifying opportunities does not mean acting on them immediately, as many of them will involve a trade-off between cash today and profit tomorrow.  But identifying the opportunities means you will be ready to take the pragmatic steps needed to keep the business running during its darkest days.  That advice may seem obvious, but even big businesses can struggle with this: the American automobile industry with its high fixed costs and over-reliance on achieving a high volume of unit sales is a very topical example.  To further understand and manage the baseline, consider the following questions:

 

1. How flexible is your business, and how easy would it be to scale things down, if sales were weak, or scale things up again, when new sales opportunities arise?

 

Consider the extent to which your costs (including people, equipment, materials and property) are fixed or vary with sales.  If you have fixed costs, consider how these might be turned into variable costs.  For example, could you move into smaller offices or close an office and only rent additional space on a short-term basis from a provider like Regus when really needed?  Instead of tying up money by holding stock, it may be worth switching to a supplier that can guarantee rapid delivery when you need something.  If you have employees, instead of just cutting back on staff, you may be able to negotiate more flexible arrangements where they get paid when there is work to do, and not when the order book is empty.  Though some may find that hard to accept, if you are frank and honest with staff they may prefer to come to terms with you and get some work, rather than risk the collapse of your business and the prospect that they will have no work at all.  At the same time, identify ways to increase manpower at short notice.  Survival is also about being able to take advantage of the fewer opportunities that come your way.

2. If a key supplier fails, does your business fail?

 

Getting a good deal from one supplier can help keep costs low, especially with discounts for bulk purchases.  However, look hard at any key suppliers and understand if there is a risk that they might fail.  Think ahead and judge the difficulty of switching suppliers at short notice.  If there is a danger that a key supplier may fail, establish a relationship and make some purchases from an alternative now.  This will reduce the impact if the worst happens to your normal supplier.

3. Where would you turn if there was an emergency, and your business faces insolvency if you cannot find a quick source of extra cash?

 

Overdrafts are one answer to this problem, but when businesses are under strain, the overdraft can stop being a temporary source of emergency money and can start becoming a permanent crutch.  The danger is this crutch can always be kicked away at a moment’s notice.  Instead of relying solely on the bank, there may be other, better options.  They may involve sacrificing longer-run profitability in order to generate some cash inflows immediately, but recognize that there will be no profits if you cannot survive long enough to realize them.  For example, a large customer may be given a generous one-off discount in return for early payment or prepayment of a large invoice.  Stock may be sold at a loss instead of keeping it in a warehouse. Selling some of your retail debtors to a factor would enable you to get discounted cash inflows immediately.  Suppliers may be willing to provide extra credit rather than lose a reliable customer because the business failed, especially if you can commit to making purchases in future.

4. Are there ways to reduce costs by thinking ahead?

 

If you have more room for movement, now may be a good time to make investment decisions designed to help reduce your cost base.  For example, heavy discounting may make this a good time to buy essential equipment instead of renting it, so long as you have the resources to cover the initial outlay.

Beating Competitors in the Long Run

 

Staying ahead of the bear is of little benefit if you keep running in blind panic and die of exhaustion a while later.  Even in a downturn, a business also needs to plan to conserve resources and stay healthy relative to its competitors.  Be prepared to sprint for short whiles to stay alive, but also plan to outrun your competitors in the longer term.  Have the flexibility to deal with a crisis, but do not expect to operate in crisis mode forever.  Conserving the resources of a business also includes conserving the energy and goodwill of its workers.  That includes you, as the boss.  Think of managing the business in a downturn as a two-step decision-making process.  Surviving from one day to the next may necessitate some desperate measures, but once the immediate threat has subsided, you need to pace the performance of the business and try to ensure you secure the future as well as the present.  Once the baseline for survival is understood, you will know what additional options you have to make decisions designed to improve profits.  When you know the cash position is reasonably secure, as far as can be predicted, shift your thinking towards improving the profitability and hence generating the reserves that will help you cope with any further unexpected downturns.  Improving profitability may seem implausible in a depressed market, but the question here is not the profitability of your business from one year to the next, but the relative profitability of your business compared to rivals.  Here are some questions that are relevant to improving the profitability and health of a business in a downturn.

1. Where might you turn for alternative sources of investment funds?

 

During the downturn, banks will try to rebuild their balance sheets, and investors will rethink their attitudes.  Try to turn a negative into a positive by looking again and seeing if there are better potential sources for investment in your business than the ones you previously considered.  If you solely own the business you run, be clear about how much income you need from it.  A paycut now may lead to greater returns later.  If the business owns its equipment or premises, it may be able to sell them to get an immediate source of capital, but retain the use of the asset by leasing them back.  Chastened by a depressed stock market, friends, family and employees may prefer to put any spare money into your business, one that they know first-hand, instead of backing enterprises they know relatively little about or earning meagre rates of interest from banks.  During a time of turmoil, big and regular customers may be willing to secure your services and survival by making long-term purchasing commitments.  In a similar way, you may be able to keep your business costs down but guarantee the discounted services of a supplier by offering them a revenue-sharing deal on larger contracts.  In addition, think seriously about retaining as much profit as possible for both reinvestment and protection against any unexpected hiccups.  Low interest rates for the foreseeable future means that early repayment of debt is of less benefit than it was.

Small businesses should not overlook the few opportunities for government assistance that are out there.  Assistance may come from local or national programs, and the biggest challenge for small business is often the task of identifying what help they may be eligible for.  For example, a business that does research may be eligible for the Small Business Innovation Research (SBIR) program.  Government initiatives like this are likely to be favored by Obama’s presidency, so small businesses would be wise to stay aware of new funds and changes in rules.  It may even be worth adapting the business model to take advantage of such funding.  For example, instigating a novel research project backed by public money may be a way to retain and utilize staff that would otherwise be made redundant.

2. What is your niche or Unique Selling Proposition (USP)?

 

In a downturn, many businesses find themselves competing on price.  However, a business can make itself less vulnerable to competitors' price cuts by offering something unique.  If a small business is going to rationalize, it should eliminate its service or product lines that are peripheral or loss-making, and concentrate its resources on its core strengths and most profitable lines, whilst identifying the main competitors for those particular lines.  It may be embarrassing or seen as a sign of weakness to curtail some offerings, but it is better to divest and survive then to persist with unprofitable lines and be dragged under as a consequence.  It may also be wiser to allow rivals to win new sales at little or no margin, instead of trying to match their prices.  Whatever the core offerings are, identify ways to distinguish them from those offered by rivals.  Speak to customers, and make sure you know what, apart from price, motivates their purchasing decisions.  Simple but successful techniques for small businesses tend to emphasize their smallness.  For example, customers may be seeking a more personalized approach to customer care.  If you are clear and straightforward about communicating your USP to customers, they may help you greatly by repeating that message by word of mouth and hence fostering further business for you.

3. Who offers the best support for your business?

 

At a time of upheaval, businesses may feel locked-in to their current banking arrangements, or may prefer to stay loyal to those they have dealt with previously.  However, with everything changing, now is a good time to double-check that the business is still getting the best deal.  Review deals on overdraft facilities, compare rates on foreign currency transactions and examine returns on deposits.  Insurance will be another financial service that will be rocked by recent events.  Shop around for the best insurance for all aspects of your business as premiums may have changed considerably.

In the same vein, be sure to reconsider all suppliers, from legal advisors to stationery suppliers to janitors.  However, be wary of false economies.  If inferior quality from your suppliers has a chain reaction that impacts your customers, it may cost more than it saves.  Remember also that there is no saving in having busy and talented people - including the boss - doing menial chores because you cut back on basics.

4. What are the best tactics to increase sales?

 

Increasing sales may seem implausible during a downturn, but staying confident is important to surviving.  Some customers, like public bodies or wealthy individuals, will be better shielded from the economic downturn.  Try to increase the mix of sales that goes to those customers.  One good way to find out which customers are doing best is to actually talk with them.  Your business is small, so turn that into an advantage by being close to current and prospective customers.  If you treat good customers like your friends, they will care more about your survival and will do more to help you in intangible ways, like giving you advice and helping you to network.  Because customers may also be short of cash, be imaginative and fearless about proposing payment-in-kind when there is a chance your customer could also be your supplier.  Avoid a formulaic approach to chasing debts and looking for new sales prospects.  Try to separate those customers that have a temporary cashflow problem from those that are delinquent payers or time-wasters.  By the same token, focus sales and marketing efforts on the most profitable products.  It is likely the business will cut promotional costs, but instead of reducing all such expenditure across the board, try to be more targeted and effective with the reduced spend.

If a product is unprofitable, and it is possible to discontinue it without a negative impact on costs or commitments to other customers, accept the immediate reduction in revenues that comes with that and refocus energies on more profitable lines.  If a product is failing or unprofitable, but it is not possible to discontinue it, try to boost sales all around by offering your weaker lines at heavily discounted prices as part of a package with other, more profitable, products.  Whilst it is tempting to think negatively, do not be afraid to consider offering something new if you believe it has a genuine advantage over rival offerings, or will occupy a unique place in the market that nobody will be able to match.  Just take the precautionary step of asking your best customers if the new offering would interest them now, or whether it is best to delay its launch until later.

Like you, competitors may be cutting costs to survive.  This may lead to a decline in the quality of their services or products.  An alert business may be able to steal disgruntled customers from rivals by promising quality and an attention to detail.  This is especially relevant to small firms, which can be more agile and responsive than their larger rivals.  Try to make ‘value for money’ your sales mantra instead of simply lowering prices.  If ultimately you have to cut prices to stay competitive, then protect your gross margin and future revenues by linking the offer of aggressive discounts to customer commitments to your business.  This may take the form of guarantees to buy in bulk or contracts with longer durations.

 

Keeping Faith

 

Despite the downturn, remember why you entered business.  Was it just to make money, or did you also believe you could be better than the rest?  If your reason is the former, think seriously about how important the business really is to you – it may be better to close it now than risk losing more by keeping it going.  But if you believe in your business, then keep faith with it.  That belief is also an advantage over the people who just saw business as a source of financial rewards.  If you are terrified by bears in the woods, then probably you should stay where it is safe, but if have an inner reason to make the journey, you will be able to traverse the darkest, densest forest and make it through to the other side.  Right now, many small businesses are facing stark choices.  Belief that your business offers something special, and is worth the pain and struggle you go through, could make all the difference between success and failure.  Remember that when reviewing your decisions.  Cutting the same costs as your rivals, and making the same choices as your rivals, leaves you no better off than your rivals.  Many will be picking cheaper suppliers, reigning in promotional expenditure and preparing themselves to do less at lower quality.  Minimalist survival tactics may leave the business so unhealthy that it fails anyway.  Running with the herd can be very tempting, but remember the herd mentality is also one of the reasons why the economy is in the mess it is.  If your business can positively distinguish itself from the herd, it can still thrive, even in a downturn.  Look for opportunities to be better, as well as to survive from day to day.  If you can be pragmatic enough to ride out each crisis, but also retain a vision of what makes your business better than its competitors, and communicate that to your customers, you will stand the best chance of doing more than just emerging from the woods.  You will also be readying your business to prosper when the dark times are over.

I run a marketing firm, and this year has seen a slow down in business the second half of the year, as well as an increase in slow pays and even, no pays.  We've addressed this problem in the past by focusing on the tension between winning large projects and medium projects.  The difference in the sales cycle and revenue was challenging, but manageable.

The Large Client Solution: $30,000-80,000 project - 3-6 months.

The Sales cycle is at least three months, and sometimes six months.  These are signature project that can account for 50% or more of the revenue for the year, and give us the big brand names that identify us as players in the industry.  There are two main challenges to large projects.  First, the bidding process is so long, we often have to commit resources that may not be available when the bid is won, which means our staff is forced to double up on work.  It's a huge manpower problem, as oftentimes without the larger products, we'll lose the freelancers we depend on to other projects.  This is a normal risk that all small agencies have, but the promise of a project that can meet half your yearly revenue, and oftentimes grow the business two to three times your current size (the bigger companies almost always have more projects, and once they've worked with you, continue to do so). 

The second problem is the time that larger companies require cuts away at your sales and networking time.  Large projects steal away your time selling new business, and when the project ends, you don't have a pipeline of business.

The Medium Client Solution:  $5,000-$20,000 1-3 months

These projects are built through your reputation in the community. They are primarily entrpreneurs, start-ups, and other small businesses looking for quality work from someone who gets them.  These projects are bid and close quickly, and are the majority of our work, but they require hefty time commitment in the community, meeting new clients and working your referral network.  Closing rate is about 25%, but we've managed that rate by tightly managing our sales process.  When the sales cycle drags out, or if we get the sense that we're a "third bid," or the client is cash-strapped, it's easy to move on.

The Problem:  Business Slowdown

These two strategies kept us in good standing for three years.  But as small businesses are now struggling, and large businesses are bidding projects but not awarding them, we found ourselves looking at a huge budget gap starting in the fourth quarter.   For the first time since we started our business, we were actually faced with the prospect of not having projects in the pipeline.

Recession Solution:  Be The Client

Our solution was to change our offerings.  The one project we didn't tackle for years was one and two hour consulting gigs.  The selling, invoicing, and focus required to sell, execute, and invoice smaller clients looking for information was simply too high.  Medium sized projects keep you afloat, and they're barely profitable unless you get multiple projects at the same time.  There was just no way to sell projects that maxed out at a few hundred dollars.   And yet the highest volume of prospects was the one and two hour proposals.

Since we are a marketing company, we decided to turn ourselves into the client.  We put together an ecommerce site, set up an online marketing and affiliate plan, and begin marketing our expertise in training DVD's.  We still go after medium and large projects on proposal, but we now have a revenue stream aimed at capturing the tire-kickers, the low on cash entrepreneurs, and those looking for just an hour or two of training. 

Using the networking skills that sell the medium projects, we've built a distribution channel with other clients and even competitors, who lack the resources or ability to recreate our training series.  The larger companies also work into the mix, as many of the directors that we sell large projects to are in urgent need of cutting-edge marketing training.  Each person who buys a DVD does so as a future client, both in repeat sales and in future project consulting.  

The project is a risk, as the revenue could drop off any month we count on it to be there, but it's also just as easy to market 100 DVD's in a month as it is to win a $10,000 project.  The way we look at it is simple.  We're a marketing firm.  If we can't market our own products and services, how could we possibly be trusted to market someone else's? And in the process, we've also picked up new skills in programming, video, packaging and fulfillment, and credit merchant accounts, which has led several former clients to look into replicating our system for their business.  The knowledge has also led us to prepare plans for two more stores, which we've already got commitments from major partners to assist in distribution and sales. 

Check out our store, which runs for less than $100 a month for all fees, at http://store.socialmediaheadhunter.com. Pre-launch figures have been fantastic, and we're prepping right now for the full marketing program next week.

To top it off, the cash flow problem is solved, as the money for every sale is processed through our credit card site (which we can now also use to bill for consulting services, reducing slow pays and those who can't pay in 30 days with cash).

And in a final note, that may be seen as sucking up, but actually is true - we use the AmEx Plum card.  We got it because it looked really cool, and the terms made a lot of sense.  It's not a full credit card, which means we can't just run up debt on it.  The necessity of paying it off each month helped push us to complete the stores on deadline and keep us from going too far in the hole.  We didn't have the luxury of borrowing at high interest rates, but we had the line of credit available to buy supplies and packaging in advance of their sales.

 The major advantages of small business are efficiency and nimbleness.  In our case, we were able to switch from a services to a diversified product and services company in a matter of months.  Companies may be cutting back on their spending, but everyone can afford a training DVD or five.

I seem to be getting pretty good results with an "we're all in the same boat" attitude. I try to cut costs as much as I can (more so than before) and I am very honest with both suppliers and clients; "I know it is tough for you, and it is tough for me. I intend to be around no matter what happens, so I am looking to minimize my costs; how can I help you minimize yours?"

I don't use online banking, etc. As you may know, there has been some significant disruptions from hackers located in the Ukraine with such services, and I don't feel I can take the chance until I know for sure such services are secure. I suspect with the current situation causing layoffs things will get worse, not better.

I also use linux. I suspect that with the financial crisis pinching everyone, the assaults on Microsoft systems will rise to a high level.

I buy things I need personally now, rather than assigning the tasks. A mistake might be especially hard to take in this environment.

Basically, I am becoming more and more security minded; since I expect that the "others" (hackers, etc.) are also feeling the pinch and will try harder. At the same time, I am also becoming more outgoing and friendly - people respond to sincerity much more than they did before. In other words, I am trying harder too.

AND, I will be here, no matter how bad it gets. Quitting is not an option I even think about.

They don't call 2008 "The Year of the Rat" for nothing

Although some small businesses will emerge from 2008 relatively unscathed by the financial turmoil it is likely that most will be affected negatively as we move ahead into a recessionary economy and the perils of uncertainty in the global economy.   This period is likely to last *at least* 1-2 more years and could go longer.

Be Realistic

Although new and great challenges are always coupled with new opportunities, my feeling is that the best small business strategy moving ahead is to cut your expenses as much as possible, assume the recession could last for several years, and seek stability more than growth unless you can grow the business very inexpensively.    Rather than borrowing to grow consider options where you can effectively monetize your own time and experience towards the longer term goals rather than take on more business development expenses (and thus usually more debt) as one tends to do in a normal business environment.   Following are a few examples:

How about writing the business blog you've been putting off?

Consider setting aside a few hours a week to write that business-related blog you've been putting off for the past few years.   Even the most mundane products or services will benefit from greater online exposure, and given the current online environment there are few - perhaps no - better ways to cheaply promote your business online than with a timely and relevant blog featuring your own business expertise, ideas, and recommendations. 

Rather than hire a consultant just roll up your sleeves, head on over to Wordpress.com or Blogger.com, and pull together a simple blog for your small business.   Write what you know and you'll often find you had more to say than you realized.    Although ideally you'll write often in your business blog, simply having one is a significant enhancement to a website presence, and the blog and site do not even need to be integrated to be very effective as promotional tools.

Review your expenses.  Cut some fat and review them again.

Successful businesses often "strategically" overlook some waste, especially when the "nickels and dimes" simply don't seem worth hassling when there is big money to be made with alternative activity.  However this can lead to wasteful spending creeping into your business even during lean years and even if you've kept the budget pencil sharp it is likely you can find cost savings in places you may have thought were simply "untouchable".    I recently inventoried my phone budget and was surprised by how easy it has been to find hundreds in savings with *improved* services simply by paying more attention.   Some lessons from that have been:

Mobile Phone and Data:  By renewing a 2 year plan I got a substantial rebate from Sprint as well as very inexpensive phone upgrades.  

Land Line:   Bundling my land line with cable internet and TV will save me about $300 in 2009.

Toll Free line:   Changing to an online 800 line carrier should save me over $100 per year over my current "business class" carrier.

This simple inventory of my "real" phone needs that I'd been putting off for some time led me to savings well over $500 with an actual increase in the overall quality of my services.

Hey, what about the opportunities you were talking about?

The great thing about running a business cost effectively is that you can focus more attention on being flexible and looking for new approaches and new opportunities.  Also, having more cash on hand, low or no debt, and a generous line of credit means that you can seize those new opportunities when they present themselves.     Until the real estate meltdown of 2007 I was making more money passively from real estate appreciation than actively from my business.   Although I think the real estate market will remain soft for at least another year, I think there will be an increasing number of simply spectacular residential real estate investments as the market stabilizes and returns to the modest levels of home appreciation we have seen in this country since the great depression.  This historical appreciation ended with the current real estate and financial crisis.   For those with cash or good credit 2009 (though I think more likely 2010) will bring some fantastic investment opportunities.

Summary

Business, much like the Chinese concept of years, is mostly a cyclical and not a linear state of affairs.  We saw many unprecedented real estate and business valuations in 2006 and 2007 and in some ways we are now paying the price for those highs in terms of the current lows. 

The small business owner should now seek stability and efficiency while preparing to take advantage of the flexible and nimble nature of small businesses to seize new opportunities, many of which will be spawned in the fires of the current financial crisis.

 

 

Fear is easy, but hope is smarter. I think the conventional wisdom is wrong, and that 2009 offers a lot of new possibilities. Yes, the landscape will be radically different -- but there's real opportunities mixed in with the challenges. We're approaching the end of a year that we'll always remember -- but here's my strategy for the year ahead.

Sales are Up If You Know Where To Look
I'll never forget the neighborhood antique store that found a way to eliminate its lease altogether. They moved all their inventory into storage, and put a cardboard sign in their window that said: "Moved to eBay."

This year in the crucial week after Thanksgiving, sales actually increased 24% for consumer electronics -- online. The economic downturn has consumers hunting for bargains, and presumably they've turned to the web, with its unlimited number of choices for comparison shopping. They represent a real and unacknowledged opportunity for smart businesses -- and they may be the key to survival. We've always known that consumers were moving online, but the economic downturn has speeded up the process.

This December is the perfect time to maximize your online sales outreach. A friend told me about a collectibles store in Boise that discovered a new audience online. Suddenly they weren't limited to collectors in a single city; they could sell to the entire planet. In some ways, online shoppers are easier to reach, by targetting campaigns through sites like StumbleUpon and Google AdWords. Some businesses report the cost-per-conversion is actually cheaper with online sales

Not every product lends itself to online sales, but for those who can, it can be easy and lucrative to set up an online storefront on sites like Amazon and eBay. (Some merchants are even advertising on Craigslist.) Consumers are doing more of their shopping on the web, and online audiences are the last, best demographic.


The DTV Wildcard
On February 17, every TV in America will stop receiving broadcast programming. It's the federally-mandated switch to digital signals, and there'll be a massive rush to electronics stores for converter boxes. (The government is ramping up their public service ads and has already begun handing out $40 coupons to anybody who requests one.) You couldn't ask for a better stimulus for some industries -- including electronics retailers and component manufacturers. And once shoppers hit the malls for their converter boxes, there' s a chance to entice them into other sales. I'm expecting my local retailers to launch promotions with a DTV theme.


Be careful
An unexpected expense could wipe you out. Make sure all your equipment is well-maintained -- and make sure you have a backup plan.


Sell stuff
When my nephew fell behind on his credit card debt, the solution was obvious: "sell excess inventory." This is the proverbial rainy day for everyone in America, and it's time to perform a quick inventory for high-value items that can be converted into ready cash. For tricky items a broker might pay for himself, covering cost of their commission by obtaining a higher sale price.


Buy stuff
Hard time are always an opportunity. Businesses that are folding will sell their inventory at a discount. Start watching for them.


Watch Your Spending
There's a reason companies are laying off workers: it saves money. I know other businesses that have offered shorter work weeks to their employees, and one that even renegotiated salaries in lieu of an actual layoff. Everyone understands that we're in extraordinary times, and sometimes that leads to a surprising new spirit: a willingness to compromise. Other businesses are zeroing in on the biggest cost of all: they're investigating whether they can refinance their long-term leases and mortages.


Have hope
Some very smart people are working on the economic crisis, and there's new blood in Washington. And this will mean new opportunities in 2009. There'll be massive new federal spending projects, plus "stimulus" checks delivered to every taxpayer. In addition, there's industry-specific proposals that are being considered. It's very possible that 2009 could surprise your business with a new government relief plan.