wearmanyhats

Unless your business is one that thrives during recessions, such as a process server that has to serve foreclosure notices, or you’ve suddenly become the only person in town after your competitors have gone under, a recession can hurt your gross profit.  To the average non-business type, this means that sales are down, that there is less money coming through the door.  On a million dollar business, a loss of 20% can mean $200,000 of lost revenue.  This can result in staff layoffs of two or three office people, or even some production people.

A good business owner grows his/her business by sometimes going without a paycheck while adding on a new person.  Then when the added business has absorbed the new employee, the owner can once again get a paycheck.   This is fine when business is good.  But during an economic downturn, business owners scramble to figure out who has to get the cuts.  Sometimes the owner loses income and staff lose jobs.

Here are some survival tips for small businesses:

1.  Work with a mentor or a SCORE (Small Business Corps of Retired Executives) representative to determine the best staffing during this downturn. Have them help you also set realistic goals for the year.

2.  Consider keeping two part-time people instead of one full-time employee in order to best use each person’s job skills.

3.  Cross train your employees if possible.  Then if you have to let one person go, another can pick up some of the duties.

4.  Analyze your competition every six months to see whether they have an edge over your business on which you could improve.  Ask yourself if you feel they are going to still be in business in six months. If you feel they may close, prepare for the customers to begin to come to your business.

5.  Since banks are not loaning easily, consider private sources for needed capital.  However, be sure to have a realistic expectation of business in the upcoming season.  For example, a loan to pay your worker’s compensation insurance or some such loan is sensible in that the amount of money owed will be refunded if there is a decline in the number of employees during the year.  But if you are thinking that a loan will tie you over a slow season, keep in mind that the slow season may not pick up this year.  Your business may be unable to pay that loan.  Cutting back right away may be the most sensible thing to do.

6. Outsource jobs that may otherwise have to be cut, rather than adding  a new employee and then cutting that person.  A good example is a bookkeeper.  If you were thinking of adding a new person to the staff for a busier summer season, consider putting your staff bookkeeper in a new role and outsourcing the books.  Your employee could always audit the books for problems, and be cross-trained.  That person can always go back to bookkeeping later when the economy picks back up.

7,  Keep up on the innovations in your industry.  One of the the things that customers look for is current technology, and good-looking facilities.  Shabby looking stores and shops die quickly as foot traffic always goes to the places that look better.

Only the best run businesses survive recessions.  Only the businesses that are flexible enough to adjust to the needs of their customers and the market will thrive.  Hopefully these suggestions are helpful to the average business owner as s/he faces the challenges of the next year.

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