Title: Secrets of Survival for Small Business in a Depressed Economy
Tags: Business, economy, advertise
Blog Entry: The SCORE Association, “Counselors to America's Small Business” Page 1 of 5 Serving Pinellas County, Florida Bulletin Number 109 (Issued January 2009) SOS (Secrets of Survival for Small Business in a Depressed Economy) What are the Options? · Do not panic, avoid rash decisions · Think Tactically o Need tactical, survival strategies o Focus on the next three to six months · Develop standard accounting reports o Balance Sheet, Income Statement, Profit and Loss Statement · Remember, businesses only fail for one reason; they run out of cash! · Focus on 5 largest expense items · Get help from an objective 3 rd party o Accountant, Lenders, SCORE Increase revenues and/or reduce costs …… or both Step 1 – Look Internally · Review the entire company objectively · Product offering is current and meets market needs · Structure, location, and appearance received positively by the market · Personnel capable and knowledgeable about the company and its products · Customers aware of the best reasons to deal with you · Customers see you as a positive addition to meet “their” needs Step 2 – Stop the Bleeding · Keep employees informed of the current business situation · Ask employees for suggestions for improvement · Review top 5 company expenditures · Owners should review all company expenditures and sign all checks · Assign one employee to collect past due accounts. If they are having a problem, owner should call · Review cash flow/cash on hand for next 3-6 months SCORE ® CHAPTER 115 The SCORE Association, “Counselors to America's Small Business” Page 2 of 5 · Monitor all employees expenses · Try to secure extended payment terms from suppliers · Consider purchasing via company credit card. This may give you15-25 days of extended terms · If cash position allows, take advantage of early pay discounts · Consider a twice monthly pay schedule · Reduce employee hours versus layoff. Also consider using contract labor (know IRS rules) · All office meetings should be very early in the day. Keep short and focus on important issues · Try to secure line of credit for unforeseen expenses Step 3 – Downsize · Downsize office · Reduce employees, eliminate those that are not performing · Review and reduce all office expenditures NOTHING IS SACRED!!! · Reduce slow moving inventory · Review advertising and reduce if possible · Review all salaries, including owners, to see if they can be reduced · Eliminate company cars when not required · Reduce vacation time until things improve · Review the business with your accountant and banker to determine if you will be able to survive the recession · If you cannot maintain your debt levels, develop a restructuring plan Step 4 – Restructure Debt · Should you restructure debt on your own? o If you can afford to pay off past due debts over the next three months, you can handle the debt o If you need six months to pay off these debts, you can probably negotiate with your creditors o If you need one year to pay off debts, you need a restructuring plan o If you need more than one year, seek professional help · Which Creditors Should Be Restructured? o Should be restructured No longer willing to do business with you You no longer need to do business with Have stopped giving you credit Are not critical to your survival Have placed you for collection The SCORE Association, “Counselors to America's Small Business” Page 3 of 5 o Could be restructured Are still willing to sell to you Are not pushing for past due balances Their products, services or equipment are important but can be purchased elsewhere o Vital to not be restructured Are critical to your survival Without their products, services or equipment, you would be forced to close your doors There is nowhere else you could get these products, services and/or equipment · A Settlement Proposal Needs: o A hardship cover letter – summarizes the problem o A payment plan proposal – offers alternative payment options o A business history profile – summarizes causes, extenuating circumstances and actions Increase Revenues · Marketing o Keep marketing & advertising. If you must cut costs in advertising, then advertise smart, relocate your budget to measurable media o Apply extra effort in proven marketing techniques for your business. What worked before is likely to work again. o Revisit old sales leads. o Consider increasing your marketing budget and try new approaches · Bundle products o Provide special sales offerings or more attractive pricing—buy two get one free, get free glass of wine with order of calamari… · Expand o Offer related products or services. If a customer is happy with your service, he/she will prefer to buy more items from you · Evaluate pricing o Increase where necessary, decrease to improve sales. This should be done gradually , regularly and in small increments. o Successful Competitors Watch if their prices change and respond appropriately Investigate Bankruptcy · Consult a Bankruptcy Attorney · Issues: The SCORE Association, “Counselors to America's Small Business” Page 4 of 5 o Continue to operate or liquidate? o Who manages the business? o Payment terms for outstanding debt? o Which assets remain? o Types of Bankruptcy Chapter 7 – Liquidation Chapter 13 – Reorganization for individuals Chapter 11 – Reorganization for larger businesses o Note: if debt is guaranteed with personal assets, you are still liable Marketing Step 1 – Step it Up o Expand your marketing efforts o Spend your time on what really matters o Study your market o Change your offer o Increase your networking o Be more persistent o Start m aking referrals o Examine your personal brand o Increase your marketing efforts on line o Start social networking o Increase your marketing efforts off line o Dig out lost proposals o Spend your money on marketing f irst o Track, track, track o Stop any image advertising o Track the productivity of your sales people o Revamp your marketing tools o Support your sales people · Step 2 – Change your model o See a need and fill it o Make time for face time o Be customer centric o Expand your income streams, especially passive income o Look for affiliations o Accept “C” clients o Create package options o Carve out new niches o Research o Do more for less o Move quickly! · Step 3 – Grow! o Seek to expand your market share o Seek customers globally The SCORE Association, “Counselors to America's Small Business” Page 5 of 5 o Consider offering your products or services on-line o Money Don't spend indiscriminately Move on slow payers quickly Place customers on “auto bill” Develop new pricing strategies Outsource Self finance customers Bill fast…pay slow Remember! A down economy weeds out your competition leaving the field wide open for you! This document is a summary of several sources within SCORE to include the Recession Tools page of the SCORE Volunteer Center, www.score.org
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