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5 Ways to Recession Proof Your Business
By Andrea Horn of Survive the Recession
I recently put together a list of recession-proof strategies for small business. You may notice that these ideas are good ones whether we’re in a recession or tall cotton; the difference is urgency. When times are good and your customers have plenty of money to spend, you can turn a profit even if your processes are less than optimal. Now, however, you need to get lean and mean. Here’s how: Respond to Client’s Economic Woes. Ask your top clients if the economy will be affecting future purchasing, and what you can do to help. Use this information to tweak your product offerings or delivery terms. For example, you may need to offer different products or services at lower price points than you did previously. If your clients are having trouble getting credit, they may in turn have trouble buying your product. If you can afford to do so, consider offering your own financing on purchases. In a tight credit market, financing can also make a powerful marketing tool. Optimize Your Client Base. It’s time for a ruthless application of the Pareto principle. Figure out which 20% of clients (or client profiles, or client streams) generate 80% of your revenue, and focus on those. Give them freebies, call them personally, and ask them how you can serve them better. Too many small businesses assume that loyal customers will always stick around, and focus all their energies on bringing in new business instead. Don’t fall into that trap. While you’re at it, apply what I call the Reverse Pareto principle. Figure out which 20% of your clients cause 80% of your headaches, workload, and stress, and get rid of them. Either quit doing business with them altogether, or find ways to minimize their impact. If they are slow payers, insist they pay in advance. If they call six times a day checking on the status of their order, quit taking their calls and send automated emails instead. Don’t let the recession trick you into desperately chasing any and all customers—focus your energies on those who bring in the most revenue for the least effort. Optimize Your Employees. Apply the Pareto principle again. If you are blessed with multiple employees, chances are the top 20% deliver 80% of the results. Invest in them! Train them and give them increased responsibility whenever you can. Make them more productive by releasing them from routine tasks (give those to the bottom 80%), and focus on them when you have money available for pay raises. I’m not suggesting you ignore the other employees or treat them badly, but in a world of limited resources, you want to spend yours where they count. If you want to stay afloat during hard times, you have to keep your top producers happy and productive. Optimize Yourself. Your time is precious. Learn to delegate or automate all but the most important tasks. As the owner, most of your time should be spent on strategic matters such as marketing decisions, product offerings, optimal pricing, choosing the best suppliers, hiring/firing employees, and the like. You should NOT spend much time on filing, bookkeeping, stocking shelves, or any other routine task that can be easily automated or delegated . . .even if you are the only employee! A good software suite can handle your accounting from end to end. You can outsource or use part-time/temporary help for many other tasks. Don’t let the bad economy make you penny-wise and pound foolish. Growing and maintaining your business is Job One for you; don’t let the daily grind take your eyes off the prize. Pay off Debt. When small businesses fail (and 80% of them do!) it is often due to an overuse of credit, leverage, OPM, or whatever you want to call it. You can lower your exposure to the recession by paying off debt NOW. Maybe you won’t be able to expand as quickly, but you also won’t see your monthly cash flow choked off by payments to the bank. I’ve seen too many small businesses get trapped in a cycle of debt to think that routine use of “floating” expenses is a good thing. The closer your business is to being debt free, the more likely you are to survive the recession.
This intel first appeared on: http://www.howtostayafloat.com
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