The Economy

Planning for growth in the post meltdown economic climate:

Growth should generally be a key focus for business but the current strained economic conditions mean that for many businesses simply keeping above water is a major challenge. Also, some recent examples of irresponsible behavior by corporate leaders have led to great concern among customers and a desire for signs that businesses are practicing *responsible growth* and long term, *sustainable* corporate architectures.

Responsible practices and long term growth have been great basic business principles for some time, but have become especially valued by your clients, customers, or prospective business associates given the current economic climate. Luckily for the small and medium sized business, responsible rather than reckless spending and adopting a long term rather than short term focus are likely to prove even more valuable now than before.

What kinds of expansion are justifiable?

Flexibility is extremely important when times are tough. It is justifiable to expand your business to be more flexible as you face uncertain challenges. Also, expanding for flexibility may allow you to capture or create new markets for your goods or services, or even develop new goods and services. Even as business in general has stopped the dramatic expansion of the last 10 years, the pace of technological innovations remains very fast. This creates both challenge and opportunity for you and your business.

Generally expenses related to significant quality enhancements and product improvements should prove justifiable even during challenging revenue times because they help protect both short and long term business prospects and help to build the long term reputation that is important to your success.

Another expansion focus can be real estate. In many areas of the USA as well as cities around the world real estate values for some types of properties have fallen dramatically and there may be opportunities to reduce lease costs or buy properties to enhance your businesses viability. A caveat here is that prices of commercial real estate in many areas have not fallen nearly as dramatically as home values, so all other factors equal this is probably not a great time to be buying commercial real estate unless the price is very right for you. It is a great time to renegotiate your leases and other real estate service arrangements. Rent costs in many cases do not reflect current reduced values and you should be asking your landlord to price according to those reduced values and the fact that vacancy rates are higher and rising, making you and other reliable renters even more important to your landlord. read more

Let’s jump right to the question that every woman entrepreneur who’s thinking about starting up a business in today’s economy wants the answer to: “Should I start up now or wait six months?”

On one hand, you might be thinking that starting up your business in this economy would be a risk. On the other, you might be hearing buzz that the U.S. is beginning to come out of the recession, which would mean that starting up now would put you on the leading edge of post-recession confidence.

How do you decide what to do?

Regardless of when you start up your business - in a strong or weak economy - it’s important to be aware of the following 10 economic indicators and their forecast for the next six months.

10 Economic Indicators to Consider When Starting up Your Business

• Personal Income
  Personal income is down from where it was a year ago. However, it seems to be at the bottom and will increase slowly to the end of the year.
• Unemployment
  Unemployment is on the rise and will continue to be a concern, increasing from 9.4% today to nearly 11% by the end of the year.
• Outstanding Consumer Credit
  Credit card debt has been on the rise each month for several years. It reached its peak in January 2009, and then began a gradual decline. It has now reached a plateau and is not expected to alter significantly over the next six months.
• Housing Values
  The value of homes across the nation has, in general, seen a 15% decrease during the last year and a 32% decrease from the high in 2006.
• Inflation Rate
  Some good news is that the inflation rate has been stable and should not impact the economy adversely over the next six months. read more

One of the biggest threats to any small business is a disaster. And as fast as you can say business disaster, your business can go up in smoke. Most small business owners think a business disaster won’t happen to them so they never take the time to plan. But the statistics tell a different story.

According to the Institute for Business and Home Safety (IBHS), about one fourth of all businesses that close because of a disaster never reopen. That is a startling statistic.

Consider what happened a while back to a local family business in my city. A carpet store that had been in business for thirty long years burned to the ground. Gone were thousands of dollars worth of equipment and carpet, plus two smaller businesses that were housed in the same building. Luckily the owners had plenty of business insurance to cover their physical losses. But they lost their most important business asset - customer records - because of failed back up systems. They thought they did the right thing by backing up their computer systems every night. But they forgot to test whether the back up would work. And it didn’t. Rebuilding their customer base will be tough and the long-term revenue impact is hard to measure. But you can bet it will be tough for them.

With disasters like hurricanes, tornados, fires, floods and terrorism, to name a few, it’s critical for small companies like yours to have a disaster plan. read more

In tough times, one of the classic business school cliches is to “focus on your core competencies” which tends to lead to all sorts of snooze-inducing meetings where companies try to figure out just what their “core competencies” are. Of course, it’s not a bad idea to focus on your core competencies, but I’d argue that if you’re thinking about core competencies, you’re already focusing on something too boring.

In reality, the idea should be to focus on what gets you fired up in the morning. Running a small business is tough, and we all have days where it’s tough to face the day at all. But none of us would be running a small business if there weren’t some fire burning inside of us. The focus should be on what makes that fire burn brightest.

So don’t just sit around and whiteboard out what your core competencies are. Take a step back, look deep into your soul, and figure out what it is inside of you that burns the brightest. What is it about the business you’re running that gets you fired up the most? That gets you eager to start the day, and loathe to finish it because there’s just that much more that you can and want to do?

For me, personally, I love getting into fascinating discussions over important issues and trends. I’m one of those people who will discuss things into the wee hours of the morning and love getting out of bed to get into intellectually stimulating discussions that make me think. Of course, lots of people like that, but we’ve continually focused the business of Floor64/Techdirt on ways to leverage building more such interesting conversations. What more fun could we have?

Back in April, I went to the Mesh Conference in Toronto, and one of the great speakers was Jessica Jackley, from Kiva. She talked about her overall mission in terms of helping those who need microfunding — a truly amazing and compelling story. At one point, she made a comment that immediately resonated throughout the crowd:

“I’m not wealthy, but I feel I could retire on happiness.”

Find that element, and don’t worry about defining “core competencies.” You’ve already found them.

There’s a regular meme that makes the rounds every time there’s a dramatic shift in the economy one way or the other, with someone explaining why “now is the best time to start a business.” However, there are still always big concerns, especially during a big downturn like the one we’re currently facing. I can’t even begin to count the number of other startup or small business operators I’ve spoken to, where the opening question is “how’s the economy treating you?” or “how are you holding up in this economy?” And, perhaps it’s a fair question in terms of small talk between business owners, but I’d suggest that the true small business manifesto is that the economy doesn’t matter. It’s always a good time to be a small business. Here’s why:

• As a small business owner, you’re not relying on the entire economy. You’re relying on your customers. If you offer something of value, you should be able to sell it to your customers, regardless of the economy. Sure, some of your customers may be more careful in spending, but that’s just an opportunity for you.
• As a small business, you can be a lot more flexible. Big businesses have all sorts of legacy items that tie them down and make them slow. Smaller businesses shouldn’t have as many entanglements and can change and adapt much faster. If the economy goes south, then a small business can shift its strategy faster.
• A small business is often closer to its customers, so it’s better able to serve customer needs, no matter what the economy. Today, customers are looking for ways to get more for less. If you can figure out how to better provide that, you can run circles around others.
• A small business doesn’t need to bring in as much revenue every quarter to support the business. You’re small: this means your expenses aren’t as big. You just need to figure out how to make sure you’re covering your expenses, and then look for opportunities for growth beyond that.
• As a small business, you have a better sense of when the economy is shifting. Big comapnies may claim they have a broader view, but they’re looking at numbers. You’re talking to customers.

So, as a small business owner, I say, let’s stop asking each other how the economy is impacting us. Let’s impact the economy by focusing on ways to connect with our customers and give them what they need — and the economy will sort itself out. We’ve got businesses to run.

A recent report from the Giving USA Foundation found that charitable giving in the United States fell by 2 percent last year, which was the largest year-over-year drop in the 53 years that the group has been tracking American philanthropy. This statistic is not surprising considering the state of the global economy. That said, it’s quite encouraging to see that the drop (the first in 21 years) was only 2.7 percent for Individuals and 4.5 percent for corporations, and that the overall size of the philanthropic pie topped $300 billion for the second year in a row.

As Nancy Raybin, a New York philanthropy consultant, eloquently states, “The fact that there were more than $300 billion in contributions this year says that despite how bad things are around us, Americans are still generous.”

After seeing this report, I thought I’d share my experiences with my own personal favorite philanthropic site, Kiva. Founded in 2005, Kiva’s mission is to “connect people through lending for the sake of alleviating poverty.” Through Kiva, anyone can easily make a loan of $25 or more to any number of budding entrepreneurs. The average loan to these entrepreneurs is $415.92. The loan recipients range from farmers in Tajikistan to grocers in Senegal to auto repairmen in the Philippines to timber salesmen in Mongolia. And, recently, Kiva announced that microloans were now available to people in the United States as well.

For me, I enjoy making loans to people who bicycle. It’s a bit of a strange agenda, but as a cycling advocate, it gave me a nice way of searching through the huge list of loan opportunities that Kiva presented to me. On top of that, since I was able to individually choose which loans to make, I feel that much more connected to the money that I’m giving out, making the experience much more rewarding. I’ve loaned money to two groups women in Cambodia, both of which use a bicycle for transportation. Perhaps the most rewarding part of the experience is when the money starts getting repaid. It feels immensely better to think that the funds that I’m providing are being used wisely to build profitable businesses and train future business owners all around the world. I rolled the repaid funds back into other loans, which allowed my initial $25 loan to work over and over and over again. It’s quite a virtuous cycle.

I think Kiva has found a fabulous model for philanthropic giving. As of June 2009, Kiva has distributed over $76 million in loans from over 500,000 users. So, despite the tough economic times we’re in now, perhaps it’s time to take a step back and invest in others. We’re all in this together, after all.

That lone statement summarizes what seems to have become a familiar, if vague, recurring theme among many econo-pundits these days. If you try to pin any of them down on how, exactly, they think the economy is changing, you are likely to come away from the exercise empty handed.

There may be general consensus on the fact that the economy is changing but no one seems to know exactly how the economy is changing.

We have heard, variously, that content, customers and community are all king. I’ve heard some things about creating value, adding it, or even changing what ‘value’ actually means, although those discussions often skip the part where actual money changes hands because of a function business model that is rooted in reality.

Some of this stuff gets pretty esoteric and difficult to follow. It’s probably a good thing that most small business owners are too practical to pay any attention to all the hot air.

At the same time, if the economy really is changing — and I happen to agree that it is — then you need to be paying attention to what is changing and how it is changing and how that will, in turn, change the way you run your business. Not to mention the opportunities that always surface when there is upheaval, reversal, change.

So, while everybody else is trying to be profound about this, I think it’s time to return to basics.

read more

My Plans for Growth in a Down Economy

I recommend a systematic, incremental approach to growth during hard times. First, I set very small measurable goals, such as to sell a specific number of additional units of product in a set time frame. I go out of my way to collect data on not just if this goal is met, but also why my attempts to meet the goal have succeeded or failed.

Honesty Matters More Now

In some instances, selling product may be impossible due to a customer base that is temporarily unable to make new purchases. In these cases, I recommend strengthening customer service and brand recognition against competition through inexpensive and honest advertisement. Lying to one’s customers when they can’t even buy the product is going to crush any business through attrition once the economy turns around.

Do Not Compromise Value for Thrift’s Sake

Under no circumstances would I condone sacrificing value to sell products at a lower price. If I can do nothing else for my business, I would focus on improving my business credit lines and weathering the economic storm at the lowest possible overhead while maintaining my core product values. The one customer who can come in and buy from me in bad times will be 10 when times are good, but if I have to turn that one customer away, I may not be around to get the others in the future.

Get Your Neighbor’s and Big Brother’s Help

I recommend using a combination of the government SBA program and local business networking groups for the following reasons:

1. The government has no conflict of interest (conspiracy theories aside) in helping to grow small businesses. Their advice is as likely to be unbiased as anyone else’s advice, and their programs are largely free or extremely competitive with any private business assistance.

2. Local business groups generally have a mix of different industry professionals, and so they provide a great chance to gain new relationships. Just like the legend of the ice cream cone being created by neighboring waffle and ice cream vendors, a business synergy in hard times can be mutually beneficial. read more