Unless you were fortunate enough to be living on a deserted island for the past few months, it has been impossible to ignore the growing tension and concern over the financial crisis emanating from the USA and now spreading around the world. Large monolithic corporations are failing at an alarming rate and the word depression is being thrown into everyday conversation. There is a growing sense of uncertainty, doom and fear.
Whilst this crisis has been revolving around large corporations, particularly banks and by default their main clients, it has certainly started to filter down to the small business sector. Larger corporations have had to cut costs and expenditure rapidly. Every large company has a host of small businesses that provide it with services and products to keep it running. I am getting asked all the time by the media what is happening in the small business sector and what should small business owners be doing right now to reduce their risk?
Well in my opinion we need to deal with the facts and act accordingly. Much of this crisis appears to have been created by fear, but it doesn’t matter. The corporate collapses are very real. There is no doubt that there is a storm coming and small business owners need to react and react quickly rather than doing what we normally do – wait for it to hit and then clean up the mess.
We are fortunate enough to have had a warning or two. If you haven’t started to prepare – you need to. My advice to every single small business out there is :
1. Don’t sit on your hands doing nothing. Accept what is coming and get prepared. Even if the storm is not as bad as it could be, the worst that can happen is that you have lost some time getting ready. But what if the storm is a whole lot worse and you haven’t taken steps to protect your business?
2. Look at your costs. Now is the time to be cutting costs in a sensible and planned manner. Keep expenditure to a minimum and perhaps put any major acquisitions on hold for the time being until the situation becomes clear.
3. Review your clients/customer base and look for any possible problems? Have you got any clients who have started to get a little slow paying you? Have your receivables moved into 60 or 90 days? Get on top of this as quickly as you can, look for anomalies in the payment cycle and stay aware of what is happening in your financial sector.
4. Talk to your staff. Let them know you are going to tighten your belt but it doesn’t mean you will be coming to a standstill. Spell out what you need from them, be positive and upbeat but let them know that the steps you are taking are to ensure their jobs in the future.
5. Communicate with your customers. Talk to them, find out what is going on in their world. What are their plans for the next few months, their concerns, their ideas etc. Information is vital in times of uncertainty. In a war it is called “INTELLIGENCE” for a reason.
6. Check with your bank on the amount of credit you have available. Banks are certainly getting tight at the moment and as property prices have dropped, you may have less credit up your sleeve than you think. For me I like to clarify exactly how much I can borrow at a time like this and I also like to know how quickly I can get it. This means that if there is a crunch I know I can get through it, even if it means borrowing some money. Waiting until the crunch is here adds a whole lot more stress and uncertainty to the equation.
7. Move stock and inventory – if you have a business with that carries stock and inventory look at moving it as fast as possible. Now is not the time to be left holding excess stock. Your suppliers will probably be doing the same and this will give you the opportunity to buy new stock at lower and very attractive prices. That said, don’t get too caught up in buying more, even if it looks like the offer is just too good to refuse. Focus on moving the stock you have. Cash most certainly is king at the moment.
8. Don’t stop marketing. There have been many businesses that have been so busy for the past few years that they “haven’t needed to market”. Well now is when a lack of marketing strikes home. We always need to market our businesses no matter how busy we are. You will see a lot of businesses that you haven’t heard from for a long time all of sudden coming out and marketing. Now they want your business because they have got quieter. I suggest that if you haven’t got serious about marketing by now, do it. And being proactive from a marketing point of view doesn’t mean spending a million dollars, it means getting off your butt and talking to people, sending out letters, calling on customers, trying to get a free editorial in the local paper etc.
9. Value add – everyone is looking for a bargain. I am not a big fan of discounting but I am a big fan of value adding. Look for ways to give your customers even more. Get creative and smart. Be prepared to look for new ideas as people tighten their belts.
10. Make this a daily consideration. Right now, this is, in my opinion, an absolute priority for any business in the world. Review your business every day. Look for ways to sensibly cut costs. Get creative in your marketing. Talk to your staff. Talk to your suppliers. Be proactive and talk about it openly but stay positive. It isn’t all doom and gloom, but a smart and responsible business owner takes proactive steps to ensure the long term future of their business.
I certainly have not wanted this posting to be negative in any way. In fact I am a strong believer that tough times create the greatest opportunity. The fact is that whilst most people are sitting on their hands paralysed with fear, smart people are hunting for opportunities and making the most of them. And believe me there are so many opportunities at times like this it is hard to know where to start. I will make that topic my next blog in a couple in a couple of days – “Finding opportunity in the doom and gloom”.
Until then, please heed my advice. I have certainly taken the same steps in my business in a dramatic way and I am talking to a lot of people around the world doing the same thing. Economic cycles affect us all and unfortunately, small business often feels on the periphery of the economy. Well the reality is that we are smack bang in the middle of it and we have to act and most importantly react right now.