Keys To Steering Your Business Through The Down Market
We recently found an article highlighting seven tips for small business success in the current market. The author, Tom Harnish of Aerodite Inc., did such a great job covering the major points, we wanted to share his insights with you.
There is no doubt that the market is putting the squeeze on many businesses, but there are some steps you can take now to benefit your company now and in the long term. Take a look at Tom’s recommendations, and get in touch with Fahrenheit Finance if you’d like to discuss some solutions tailored specifically for your company.
7 Tips For Small Business Success In Troubled Times
The spastic stock market, an economy in the doldrums, and a narcissistic Congress represent real challenges for small business owners. What happens on Wall Street and in Washington has a very real affect on business, and managing under all that uncertainty isn't easy.
Here are a few tips from experience that can help.
1. Turn off the news
If you watch TV news you probably expect the world to end any day. No, I’m not talking religious zealots preaching that the end is nigh, or nutters that have proof, PROOF, mind you, that the Mayan calendar predicts an apocalypse in 2012. I mean the day in, day out focus of the news on, well, bad news.
Now, I’m not suggesting that a bazillion dollar national debt isn’t legitimate bad news, nor am I suggesting that when brave SEALs are killed we shouldn’t mourn their loss. But is life improved when we learn the lurid details of the latest kidnapping, bank robbery or murder? Is that news you can use?
You decide what you watch, and thanks to our mirror neurons, you feel what you see. Want to feel better about the world and your business? Turn off the news, and get back to work.
2. Cash is king
The so-called Great Recession of 2007-2008 proved, if nothing else, the maxim that “cash is king.”
Your business has to generate more cash than it uses if you’re going to survive. That’s obvious; that’s what profitability is all about. But what a lot of people don’t understand is that you can’t spend profits unless they’re cash profits. Paper profits aren’t worth the paper they’re printed on when it comes to survival and growth.
In fact, even a very successful company can go—or grow—broke if they don’t watch their cash position.
- If your salespeople are successful at generating orders, even with prices that offer a good profit, stale receivables can bite you in the butt.
- You borrow for raw materials so you can afford to hire more staff to keep up with demand. And people love what you’re selling, so you borrow to get more raw materials and staff, and before long you have a huge backlog of orders—and huge debt you can’t cover because cash is just trickling in.
The sooner you have your customer's money, the sooner you can use it. If you're selling to people who aren't paying you quickly enough, or heaven-forbid not paying you at all, you might as well start a bank because, in effect, you're financing their cash flow problems.
Don't let someone else's cash crunch become your own.
3. Manage risk
Every organization faces risk. Some you’re well aware of, but others may be hidden. When the business environment gets tough, you need to stop and think about what can go wrong. The good news is risk surveys can give you an idea where to look.
When you identify, assess, quantify and mitigate risk, you can reduce uncertainty.
4. Reduce uncertainty
There is no question that uncertainty created by partisan politics is pushing a lot of business owners to sit on cash. But you have to continue to operate, even in an uncertain environment, if you and your employees want to eat.
How do you do that? Start with where you want to end up and work backward to define the activities, development, expertise and technology you need. Then work from the bottom up.
The process is simple, but that doesn’t mean it’s easy. And you do have to keep generating income and protecting your business while you’re planning. The process will reduce the uncertainty and keep you from wasting time trying to get better and better at something you shouldn’t be doing at all.
5. Don't compete on price
Discounts only make sense if there are economies of scale that will allow you to deliver the same product or service at a higher volume, or if your marginal cost is low. If you offer rickshaw rides, a discount simply means you make less. If you offer bus rides, carrying a few extra people won’t cost you any more, so a discount may make sense.
The same is true if your business can upsell a new customer, or if a discount customer will come back as a full-fare buyer.
But if none of the above is true, don’t discount.
A lot of merchants who use Groupon haven’t figured this out, by the way.
6. Be agile
Argentine revolutionary Che Guevera once said, “Where there is confusion there is opportunity.”
While others are pondering what to do, take steps to make your company better and able to respond quickly to change:
- Don’t cut staff; cut bureaucracy
- Focus on value and cut waste
- Find ways to increase productivity and cut non-performers. (Teleworkers, for example, are repeatedly shown to be at least 25 percent more productive than their office counterparts. Manage based on results—not where, when or how they work—you’ll see involuntary turnover go up, and voluntary turnover go down).
7. Just do it
Sure times are tough, but aren’t times always tough for a small business? You can bide your time and assume there will be another upswing, but by then maybe the U.S. will have more debt, China might be an even bigger player, Congress will still be gridlocked and terrorists may still be terrorizing. Are you sure there will be an upswing? Maybe this is the new normal.
Some people sit around and wonder what’s going on. Others understand what’s going, but don’t do anything. Meanwhile, some people step up and make it happen.
Which are you?