Prepare for success during economic slump
Director of Butte College’s Small Business Development Center offers some tips
During slow economic times, how does a small-business owner maximize profitability, retain employees, increase sales, create new jobs, obtain financing and sustain him- or herself; and how does an entrepreneur start a successful business? Consumer spending is low, lenders are cautious about approving loans, business is slow; and starting, developing, growing and maintaining a business is extremely challenging. For many business owners and consumers, we are in a recession.
Here are some quick tips for success to help you stay in business or start a well-planned-out business:
• Business plan: This is definitely the time to have a working business plan in place for direction and guidance. If you do not have one, get one! A business plan is a working document that must be updated on an ongoing basis. It does not have to be elaborate, although it is important that it be concise, accurate and realistic. The most important reasons for writing a business plan are to reduce risks, avoid guesswork, plan for losses and profit, and achieve faster and better success of your business venture.
• Human resources: Review staffing requirements. As difficult as it may be, consider downsizing, temporary lay-offs, part-time versus full-time, and redefining work duties and responsibilities. Hire smart! Make sure that before you hire anyone for a position, you have a written description of the position. Base your hiring decisions on need, high return on investment and productivity. If the business is a partnership, you must ensure that you have a completed partnership agreement on hand that is legal and binding.
• Financials: Look at your financial statements (profit and loss, balance sheet, cash flow, break-even analysis) and make certain that you understand what they are saying. If there are problems, identify the problem areas and develop strategies for fixing them. Additionally, establish goals so you know when you have accomplished them and when it’s time to move on to the next step. Account receivables must always be current—even during good times. Develop a good inventory management system. High-volume, slow-moving inventory is a cost to the business. Know your monthly profit margin. Always reinvest into the business, and watch how much money you are taking out to avoid cash-flow issues. Existing businesses must always forecast for the future, and start-up businesses must produce a few years of financial projections for direction and required start-up cash needs.
• Marketing: Make the most of your current customer base. Increase your marketing efforts. Marketing dollars should actually be increased during slow economic times, but must be targeted for best results and effectiveness. Do your market research—know your niche, your market and your competitors. Always communicate with your best customers. If you are starting a business, include marketing dollars into your financial projections. Never compromise on excellent customer service.
In conclusion, be passionate about your business venture and get educated on what it takes to start and run your small business. Resources are available. The Butte College Small Business Development Center (SBDC) is here to help. There is absolutely no reason to do this alone!