The Economy

It seems that everywhere you look today, companies are going out of business.  I believe that a lot of these business failures have to do with one thing … discipline, or more accurately, the lack of it.

There are four areas where small business owners must have a high level of discipline if they are going to experience extraordinary success.

Planning

Many small business owners, myself included, have an entrepreneurial spirit and tend to fly by the seat of their pants.  They do something well, so they start a business.  They pick up a few clients here and there but never really make the kind of strides they had hoped for.

By actually taking time to sit down and write out a business plan and a marketing plan, you have just moved into the ranks of an elite group of business owners who begin to regularly experience monumental successes. read more

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.

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: read more

Downsizing cuts costs for the moment, but it also can leave companies ill-prepared for gearing back up when the economic recovery arrives. So how can you know when downsizing is the right thing to do, and when it could cost you market share in the long run?

Learn when layoffs make sense - and when they don’t — from Knowledge@Wharton, the Wharton School’s online business journal, in this conversation with Wharton management professor Peter Cappelli.

“In trying to cut operating capacity below the right level, it’s easy to cut muscle and not fat, and in today’s world most companies have not got very much fat,” Cappelli says.

 

 Avoid Cutting Muscle and Not Fat [4:53m]: Play Now | Play in Popup | Download

I think the conventional wisdom is wrong, and 2009 offers a lot of new possibilities. Yes, the landscape will be radically different — but there’s real opportunity 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 sped up the process. read more

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? read more

Much of what is written about the economic downturn focuses on the harsh realities of cutbacks, layoffs and even bankruptcy. There is no doubt many businesses have been adversely affected already and I suspect more will be as 2009 unfolds.

However, the silver lining in all of this bad economic news is that opportunities for long-term growth are also being created. Now, I’m not one to suggest business owners prey on the misfortunes of others, but there is no question that many nimble small businesses can benefit from the current state of the economy in several very tangible ways.

Acquire your competitors

When the market roars along, even shaky businesses can seem healthy. When business slows and customers start to hold on to their money, weaker competitors often fold up and send their customers fleeing for more stable providers.

Upgrade your staff

It’s no secret that many very talented folks are being shown the door at large corporations across the land. Some of those very talented, very experienced folks will turn to small businesses as a healthy alternative. An unprecedented pool of talent is available and eager to join the ranks of the small business. read more

Sometimes, I amuse myself by making a small business/microbusiness wish list.

I’ve been very good this year; okay, okay, there have been occasional forays into naughtiness, but nothing too dreadful; and I hope the fact that I can share the fruits of this list with all the small and microbusiness owners out there is worth some brownie points with the Big Guy in Red.

So, in the spirit of the season, I thought I’d share my Holiday wish list with you.

1. A tax code we can understand.
2. A microlending program that really works for microbusinesses.
3. Regulators who view small businesses as allies instead of adversaries.
4. A federal procurement system that works for businesses of all sizes.
5. Recognition of self-employment as the true engine of job growth.
6. An SBA Administrator who actually knows something about small businesses. read more

The “financial crisis” we have been dealing with this last year is something 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 on very dark, murky waters.

My approach has been a very simplified  “Back To The Basics” approach that involves focusing on the key aspects of my business’s performance.  First, and foremost, is re-evaluating 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.”  read more