Survival Tips for Entrepreneurs:
This Show was recorded live at www.talkshoe.com on October 27, 2008. Arcived version can be hear at: www.talkshoe.com or www.positivelypittsburghlivemagazine.com
If you think you are being affected by the current economic downturn and you are concerned about your business survival you are not alone. Please don’t blame the current administration government as in case you have not noticed, this is worldwide.
If you're affected, experts say there are a variety of ways to cope with the situation:
* Stay on top of sending your invoices on time to ensure your revenue returns are timely.
* Make sure your accounts all are federally insured.
* Prioritize your payments – not just for this month, but for several months out. Negotiate as many as you can.
* Ask new clients for some upfront payments – a third now, a third at a determined date, and a third upon completion.
* Step up networking as a key and inexpensive way to boost marketing, which is key in a tightening economy.
* Maximize all of the time allowed on your payables.
* Offer discounts – but be sure you know the ultimate cost, and don't appear desperate.
Following is an article from Small Business.com:
Five Survival Tips for Entrepreneurs
By DIANA RANSOM
What do you do when sales are down and your credit's been slashed? You rethink your business. Because of the ongoing credit crisis, banks are becoming even more reluctant to extend lines of credit to small-business owners. And the sluggish conditions aren't expected to improve any time soon. That means business owners who rely on banks to finance everything from inventory and office equipment purchases to new store expansions are left scrambling for ways to stay afloat without a lifeline.
"Now's the time to make tough decisions," says George Cloutier, chief executive at American Management Services, a small-business consulting firm in Orlando, Fla.
Cutting costs can help free up much needed cash flow during a crunch, but when the economy is expected to stay down indefinitely, more dramatic measures may be in order, he says.
Here are five tactics to help keep your dwindling business capital flowing:
Streamlining your business can help you stay in the black even when customers make fewer purchases. Be sure to call in overdue accounts receivables, sell off unsold inventory and analyze expenses such as office space, supplies and even your company's phone bills.
"Cut your costs viciously," says Cloutier. For instance, if you're long-time delivery vendor isn't fulfilling orders on time and it's costing you money, cut them loose. The same is true for employees who aren't pulling their weight. You might even need to do away with some benefits. While having to let go of a trusted staff member or business partner is never ideal, when the economy sinks, business owners need to make tough calls.
Eliminate Unprofitable Operations
Consider spinning off unprofitable business segments, suggests Victor Cheng, a small-business consultant in San Francisco. "Focusing on your core business"—especially if your other divisions are losing money—will serve you in a downturn, he says. To help you figure out what's working and what's not; schedule an appraisal of your business's operations.
Seek Alternative Funding
Some business owners take on a second job. Others use consulting to pad their wallets. One thing is for certain: If you're relying on a credit line to float your business until, say, after the holidays, now's the time to create a backup plan. "Don't assume that line of credit will be there," says Cheng. "If you are in that kind of situation, you either have to have a back up financing source or back up revenue source."
As the nation's unemployment rate ticks up, business owners should think about restructuring their company's compensation, says Dave Waddell, president of Waddell & Associates, an investment firm in Memphis, Tenn. He suggests linking more employee pay to variable incentives such as commissions, which are payments linked to specific sales targets. For instance, if 20% of an employee's compensation stems from commissions, make it 50%. While commissions generally work well for sales staff, linking bonuses and other financial incentives to a company's performance is another compensation technique, which generally goes for everyone. "If employees hit goals for the firm, the firm is going to do well even in tough times," says Waddell.
Cut Production Costs
"The only way to make it through a recession is to be a low-cost producer," says Bob Prosen, a small business management consultant in Dallas. Think about it this way: Inefficient competitors can survive for a time at their current cost structures, but in the end, they'll have to either raise prices or go out of business. In contrast, a low-cost producer may try lowering prices to attract added sales, says Prosen. "You're better off taking a little less profit to keep the business going."