May 2003      Vol. 12, No. 5  REAP HOME PAGE  A publication of the Center for Rural Affairs    
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Business Tips for Surviving these Lean Economic Times
Common sense belt tightening and re-prioritizing combined with early detection can help a business survive an economic downturn.

BY PHIL MENKE, REAP SOUTHWEST/CENTRAL BUSINESS SPECIALIST

Yes, this business cycle is in a downturn; no question about it. Despite the unending optimism of the roaring ’90s nobody managed to repeal the business cycle.

In every business downturn some businesses survive and even thrive. What are their secrets? There is no single magic “silver bullet.” Rather, their management strategies are an incremental collection of common sense belt tightening and re-prioritizing. They start with the first warning signals. Thus they are prepared when the down cycle turns most challenging.

Common sense strategies: First, look at that “dusty” business plan you slaved over when you started your business. You used it to sell yourself and your creditors on your business. Use it now for clues to help you adjust to the down cycle.

Look carefully at your financial data. How do your actual cash flows match up to your projections? If they don’t, analyze why not. Analyze current sales or cash inflow patterns. Project these forward. See if they still make sense. Also calculate a 12-month profit and loss statement.

Analyze your credit balance. Often entrepreneurs are top heavy on short-term credit. If more intermediate and long-term credit will ease cash flow imbalances, talk to your creditors. See if you can shift some short-term debt to intermediate or long-term. Often this move alone has a major impact on your ability to “weather the storm.”

Interview someone with conservative financial common sense. Call together a business advisory committee made up of people with sound money management judgment and business savvy.

Communicate with your creditors early, before major trouble is encountered. Keep communicating. Familiarize yourself with your business plan components, whether financials, marketing and promotion, or short and long-term goals.

A downturn in business climate is not the time to retreat from aggressive marketing and promotion. Too often marketing and promotion is considered expendable in tough times. Just the opposite is true.

Become more innovative, cost conscious, and targeted with marketing and promotion. Get more “customer friendly” in ways that analyze your customers individually.

Small rural businesses have a comparable advantage over larger firms in this. Many have a customer base small enough to interview individual customers about their wants and needs. Take the time to sharpen your marketing skills.

Analyze accounts receivable. If you have many accounts in the 60-90 day category, you need to tighten payment policy, politely but firmly and consistently. Don’t let your customers use you as their banker.

Get deposits on orders, especially when you act as a service provider on larger jobs. This helps when cash flow is tight. You’ll have the cash flow to pay subcontractors up front. For any small business, a discount might provide enough incentive keep a customer or land a new one.

Downsize or eliminate product lines or services that are low profit, take up too much of your time, and erode the economic base of your company. Do this early. Slow product lines or services eat up management time and capital and may not justify the sweat equity or borrowed capital necessary to keep them.

If you are the boss, examine your leadership ability. One option is to hire a competent professional trouble shooter to provide an outside review. This step can objectively appraise your management skills to focus on primary leadership deficiencies.

Discipline yourself to bargain harder with suppliers. If this is a tough job for you, get assistance. Suppliers will bargain in tough times. After all, they’re fighting for orders with other suppliers getting the same pressure.

Commit yourself to the highest standard of service. This is especially important during lean times. It alone can make the difference, especially in small rural businesses.

Each business has its own set of people, resources, and issues. Don’t look for a quick fix! There isn’t one. A series of small incremental changes add up to a powerful package for positive change.

Think positively. You can implement some of these “lean” strategies to enable you to survive and even thrive in tough times!


 Contact: Phil Menke, pmenke@cozadtel.net or 308.784.4948 with questions or comments.
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