Running a small business can be quite rewarding, but it’s also risky. When the economy is brisk, a good business should do well. But economies can suddenly turn down. Furthermore, even if other industries are doing well, you may run into problems confined to your sector or even to your individual business. Whether the issues are national or local, it makes sense to take precautions when times are good so that you can survive the bad times. Here are 3 ways to help ensure your survival during an economic downturn:
- Maintain Your Liquidity: All businesses need cash. Small businesses have few sources of funding, so ensuring liquidity can make the difference between survival and bankruptcy. This means you must be able to access additional cash when necessary. As a leading supplier of loans to small businesses, IOU Financial understands that good businesses sometimes have unanticipated challenges and need money quickly. That’s why we have streamlined the application process, provide instantaneous loan approval, and get you your money in 1 or 2 days. Most banks don’t move very quickly and are much more concerned with your credit rating. We on the other hand approve 85%of applications, and we look well beyond credit scores to assess your cash flows and assets.
- Conserve Your Cash: Your working capital must pay for your immediate needs. You can conserve your working capital by accelerating collections and postponing expenditures. To speed up collections, you can offer larger discounts for credit buyers who pay quickly. You can also factor your A/R invoices and auction your inventory. If you run a retail store (brick–and-mortar or virtual), extra marketing and markdowns can accelerate sales. At the same time, contact your vendors and ask for more time to pay – many vendors will understand your need to conserve cash and be willing to negotiate relaxed payment terms. Postpone purchases such as inventory and equipment. Also, defer soft costs like travel, education, bonuses, retirement plan contributions and so forth. Your goal is make your operations leaner and more cost-effective, so that you are in a good position once the market improves.
- Stick It to Your Competitors: If your sector is undergoing a downturn, turn it to your advantage by making your competitors feel the pain more than you do. This means you need to be imaginative and aggressive, doing things a little differently from your old ways. You can do this in a number of ways:
- Actively seek out new business and customers. You can buy customer lists, run email campaigns, increase advertising, offer loyalty rewards, slash prices, extend your hours of operation, and if possible, hire away top talent from your competitors.
- Add on one or more salespeople, if appropriate. Find new ways to motivate your sales staff, perhaps with bigger bonuses and other perks. It’s also a good time to reconsider underperforming staff – you may need to consider discipline or separation.
- Try to increase the quality of your customer service. When your competitors are falling apart, distinguish yourself by treating the customers better than anyone else does. Don’t ever let your customers see you sweat!
Face the economic downturns with courage and resolve – with IOU Financial at your side, the chances are good that you’ll make it through. Be sure to check out our blog for more tips for small business owners.