By Brad Egeland
I’d like to say that this article can provide you with what the title suggests – ways to actually keep your business out of harm’s way in the economy that we find ourselves in right now. But it can’t. Life’s not fair and there are few guarantees in this world. Sometimes we learn that as kids and sometimes we have to learn that the hard way as adults.
What we can discuss here are some good ways to safeguard your small business against the perils that businesses are currently facing. There’s no perfect way to combat the risk of losing your customers and possibly your business, but by taking prudent actions and measures, you can certainly put yourself in better position to weather this long-term economic storm.
If you’re in a steady mode, and you’re looking to maintain your business while those around you are failing, then you are acting wisely and proactively. There are a number of things that can be done to decrease your operating expenses – at least for the short-term – while allowing you to really not sacrifice your service level or quality. It’s all about making smart choices now to avoid needing to make rash decisions on the fly later.
Here are a few actions the small business owner can take to help ensure that their business remains somewhat healthy until the storm passes – which may be a few years:
- Get current and new customers to pre-commit. What I’m referring to here is pre-committing and even pre-paying for a certain level of service. For a photographer, this would mean not just selling the sitting fee, but getting the customer to pre-commit and pre-pay for a photo package up front. This helps you avoid the customer who pays for the shooting fee and then flakes on ever ordering anything else. The same goes for the car wash or golf course that offers pre-paid punch cards or gift cards. Cash now is so much better than the possibility of cash later. Plus, studies show that as much as 57 percent of gift cards and punch cards never get fully utilized, which ends up being great for your bottom line.
- Downsize your offerings. By this, I only mean offerings, not quality. Figure out what services or products are most popular with your customers and go to offering only those. Reduce your overhead and marketing expenses trying to push products and services that your customers are minimally interested in. Focus on what you do best and what your customers actually want the most.
- Look for cheaper vendor services. You need to be careful not to sacrifice too much quality on something like tax preparation, for example, but you may be able to save significant amounts of money by switching your insurance, changing your health plan, etc. if you haven’t checked into other options for those types of services recently.
- Consider your location. Look at where your business is located. If it’s not in the home already, is it something you can do from home? And if that’s not possible, can you renegotiate your rental agreement? Do you need as much space as you currently have or would a smaller location — and cheaper location — work just as well? Moving may be too costly or you may have a great rental agreement or one you can’t get out of easily … and that means this isn’t an option. But it may be worth looking into and keeping in mind should things get worse.
Last Ditch Efforts
If you’re at the last ditch effort point, it may be time to start that fire sale that you’ve been trying to avoid. However, taking the following actions may help you stay afloat longer while you work to either liquidate your business on your terms, pray for a miracle, of find a workable solution to remain solvent.
- Reduce staff. This is always a very tough action to take for a close-knit small business. But your main concern needs to be with the viability of your business. I’ve seen many of my friends have to let their friends go recently and it doesn’t end friendships. It creates awkward situations, but it’s a business decision, not a personal attack.
- Move your business out of a storefront. If you’re working out of a storefront, and there’s any possible way to move your business to your home, do it quickly. I realize that rental agreements and the associated legal issues can get in the way of this, but try negotiating a move out or a buy out of the lease with your landlord if it’s still beneficial to do so in the long-run. If it keeps your business afloat, it may be worth it.
- Sell the business. If you’re not absolutely ready to go out of business, but the writing is on the wall, you may still be able to sell your business and come out of the situation OK financially. Waiting till the last minute may leave your business with no sellable value. But proactively looking for a buyer before that point may mean the difference between bankruptcy and coming out of it with your initial investment. That could be huge.
These are just a few actions that the small business owner can take to keep their business moving forward in these very difficult financial times. Customers are leaving in large numbers or looking for the best deal they can get and it’s increasingly difficult to meet their needs while still keeping your business afloat.
I would appreciate hearing suggestions and thoughts from our readers that I could incorporate into a follow-up article. If you have thoughts or feedback on this article and possible measures that you think would be helpful, please post them in the comments section below.
About the Author
Brad Egeland writes for www.BusinessKnowHow.com , a popular small business website that provides ideas and strategies for growing a business and making it profitable. The site attracts 3 million visitors a year, contains thousands of free articles about sales, marketing, internet marketing, business finance, ecommerce, and all phases of starting and growing small and home businesses. Visit Business Know-How and sign up for their free newsletter atwww.BusinessKnowHow.com.