What Are 5 Ways to Keep Your Business Going in Hard Times?
For small business owners who are seeing their sales and profits plummeting, the future might look bleak. What can you do to survive through stormy economic times?
Keeping a small business afloat in difficult times is often challenging. However, since many small businesses also come with very passionate owners, some simple attention to detail can help ensure that a business sails right on through to calmer and more prosperous economic times.
Unfortunately, there is no set playbook to follow to "right the ship." Every small business is different, and each carries unique risks and rewards. These differences make copying another company's turnaround strategy to the letter unrealistic.
Still, there are some general strategies business owners can follow to help stop taking on water and start bailing themselves out.
- Keeping a small business afloat in challenging times can be difficult, but extra attention to detail can help ensure that a business survives.
- Because every small business is different, and each carries unique risks and rewards, there is no set playbook to follow to "right the ship."
- Some useful advice that applies across small businesses includes: looking at the big picture, inventorying the staff, making sure the business has ready access to cash, sweating the small stuff, and avoiding a sacrifice of quality.
Understanding 5 Ways to Keep Your Business Going in Hard Times
1. Look at the Big Picture
People have a tendency to attack the most obvious problems with vigor and without hesitation. That's understandable, and perhaps the approach makes good business sense in some situations. However, it is also advisable to look at the "big picture" to make a positive and lasting change.
It's an opportunity to better comprehend the size and scope of existing problems and further understand a company's business model—determining how its strengths and weaknesses come into play.
For example, suppose a small business owner discovers that two employees are consistently making mistakes with inventory that cause certain supplies to be over- or under-stocked.
While an initial reaction may be to fire those employees, another approach might be to examine whether the manager who hired and supervises them has properly trained these employees, or if the manager is the real problem. Just like in investing, by looking at the issue from a top-down perspective it is possible to reduce or eliminate the chance that these problems will occur again.
So a manager might fire the two error-prone employees, or perhaps even the manager, without a second thought. This might damage the business, however, if the manager's relationships with existing clientele have a history of bringing in repeat business and substantial revenue. Some simple training for that manager might be a better alternative than termination.
Taking a top-down approach and understanding the true problems holding your business back will help you understand the company's strengths as well as its weaknesses, and prevent change from adversely impacting future sales.
2. Take an Inventory of the Staff
Payroll is often one of the top costs a small business owner has, so making sure the money is well spent makes sense. This may involve a thorough review of the staff—both when a problem arises, as well as during the normal course of business—to make sure the right people are on-board and doing their jobs effectively.
Both small business owners and large corporations tend to be "penny wise and pound foolish" when they hire the least expensive workers. Sometimes, the productivity of those workers may be suspect.
Hiring one worker who costs 20 percent more than the average worker but who works 40 percent more effectively makes sense, particularly during periods of crisis. By constantly seeking resumes and interviews from new people, business owners can make changes to staff when needed to increase efficiency.
3. Ensure the Business Has Access to Cash
Small business owners should take steps to ensure that the company has access to cash, particularly in periods of crisis. Visiting a bank loan officer and understanding what's required to obtain a loan is a good first step, as is opening a line of credit in advance to fund possible short-term cash flow problems.
Small business owners should have other potential sources of capital lined up as well. This might include tapping into savings, liquidating stock holdings, or borrowing from family members. A small business owner must have access to capital or have a creative way to obtain funds to make it through any lean times.
4. Start Sweating the Small Stuff
Although it is important to keep an eye on the big picture, a small business owner should not overlook smaller things that may have an adverse impact on the business.
A large tree obstructing the public's view of the business or the company's signage, inadequate parking, lack of road/traffic access, or ineffective advertising are examples of small problems that can put a big dent in a business's bottom line.
Considering and analyzing the numerous factors that bring customers in the door can help to identify some problems. Going through your quarterly expenses line-by-line may also help. Owners should not be checking for one-time expenses here (as these items were most likely necessary charges). Instead, owners should look for small items that seem innocent but are actually draining the accounts.
For example, items like office supplies quickly get out of hand if ordered improperly. Similarly, if your supplier increases product prices, you should consider looking around for a cheaper supplier.
5. Don't Sacrifice Quality
If the problem is an issue with product quality, then it makes sense to attack it head-on. It also makes sense to stay on the offensive and get employees on board with changes that are being made. However, owners should be cognizant of not sacrificing quality when making these product changes.
Business owners seeking to improve margins on a particular product should be wary of making dramatic changes to particular components. For example, if a pizzeria is going through a dry spell, the owner could seek to expand margins per pie by purchasing cheaper cheese or sauce ingredients.
However, the strategy could backfire if customers become dissatisfied with the taste (quality) of the pizza and sales decrease. The key is to make cost and other cuts while retaining or improving the quality of the finished product.