Techdirt Contributors

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

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

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. 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

I run a marketing firm, and the second half of year has seen a slow down in business 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 for large clients is at least three months, sometimes six months.  These are signature projects 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 projects, we’ll lose the freelancers we depend on to other projects.

This is a normal risk that all small agencies have, but the promise is a project that can meet half your yearly revenue, and grow the business two to three times its current size. (The bigger companies almost always have more projects, and once they’ve worked with you, they 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 entrepreneurs, startups, and other small businesses looking for quality work from someone who “gets them.”  These projects bid and close quickly, and are the majority of our work. read more

The 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’s resolutions for  the individual that can also suit  the small business owner.

Lose Weight: Slim down your business by focusing on products that are core to your business and eliminating those that are not. This may also mean scaling back existing products or developing new products scaled for a 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 studying your competition will help you survive the current financial crisis and prepare for the economic recovery . read more

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 differently, 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 read more