How small businesses can survive
The last 18 months have been difficult on locally owned small firms because of falling consumer confidence and the reluctance of shoppers to make large purchases. According to the National Retail Federation, nearly 84 percent of consumers say they expect to reduce their overall spending this year.
There are steps that small business owners can take today that may help change these dynamics and make the 2009 holiday season and beyond more profitable and successful. The U.S. Small Business Administration recently surveyed its resource partners to determine their top business strategies on surviving in this economy. Below are their top eight tips.
Monitor uncollected receivables. It is critical that small business owners monitor their accounts receivable. The holiday season brings vacations and distractions that can adversely affect a customer’s focus on paying their bills. Customers who become lax in paying invoices and bills become an immediate drain on business cash flow. Never let customers be late in paying their bills to your business. It creates a bad precedent.
Reassess all expenses immediately. Small business survival means creating benchmarks and ratios to better track expenses and key performance indicators, allowing business owners to react more quickly and knowledgeably to changes in the business, including materials costs, labor expenses, and a drop in sales. One of the biggest expenses is inventory. Maintain strict control of inventory and your chances of surviving the holiday season are increased dramatically. Ultimately, the goal is to operate within a “smaller capital box,” and avoid having to refill it with outside resources like business loans or credit card debt.
Involve your employees. Employees have a lot at risk too. Your employees are critical to your success, and right now they may be scared to death about losing their jobs. Staying silent is never a good option. Talk to your employees and tell them as much as you honestly can. Options include reducing work hours instead of laying off staff. Loyal employees may even volunteer to work a few extra hours to keep the doors open on Sundays or after hours.
Reward loyal customers with discounts, “extreme” customer service and other incentives. During this holiday season, consider offering a 10 percent or higher discount to local customers who have supported your business throughout the year. Back this discount with what we call extreme customer service — extreme in that you treat all customers as if they are your most important. Personalized, one-on-one customer service is the main reason many people shop at a small business and forgo the big box stores.
Dated inventory is a cash drain on any business. One successful marketing technique is to hold an after Christmas inventory blow-out sale. Huge discounts on old or outdated inventory always bring price-conscience consumers to your door. Many keen business owners are now announcing these sales on social networks such as Facebook. According to one business owner, this type of sale can generate approximately one month’s worth of revenue in one day. Now that’s smart marketing.
Immediately establish a great Web site to drive Internet sales. Estimates show that nearly 40 percent of all sales this holiday season will be made on the Web. With most consumers moving to DSL or other high-speed Internet connections, making a quick sale online has become simple and fast. Establish a Web site that can drive immediate sales — with relatively little cost — to your small business.
Increase cash reserves and reduce unnecessary cash outlays. This is a step that should have been instituted six months before the November/December holiday shopping season. Positive cash flow pays the bills and keeps the doors open. Cash on hand also pays for those unplanned and unavoidable outlays of money. We take calls every day from small business owners needing last-minute business loans to cover unexpected inventory purchases or emergency cash needs. Don’t be one of those businesses left with no options and no cash on hand. Do your business a favor by increasing cash reserves and reducing unnecessary cash outlays.
Today is the day to take charge of your business by making an appointment with one of the SBA’s many resource partners — including SCORE and the Small Business Development Centers. We can help you develop a well-defined and comprehensive holiday survival strategy. Go to www.sba.gov/region5 for a list of Small Business Development Centers and SCORE Chapters throughout Region 5.
This time of year there is tremendous pressure on all entrepreneurs to keep their business doors open, and the holiday shopping season can make or break a business, but surviving the 2009 holiday shopping season and beyond can be less stressful if you follow a few simple survival strategies. The SBA remains committed to helping your small businesses prosper and succeed.
Marianne Markowitz is the Small Business Association Region V administrator.