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Feb 1, 2009
However much your portfolio has shrunk, it's important to remember that life goes on. Small businesses experience ups and downs that are sometimes completely unconnected to the market and the economy. These business owners are accustomed to challenges. Business, like life, is cyclical. And in bad times, things are never as bad as they seem, just as in good times things are rarely as good as they seem.
There are some encouraging signs. Energy prices have almost dropped in half in the past year, which means that the prices of supplies related to energy, and that is just about everything, have also stabilized. The credit crisis seems to be easing, as the government pumps billions into the system to free up loans. Interest rates are still historically low. Of course, the market decline is bad. The biggest issue is simple confidence. A rapidly declining bank account motivates businesses and consumers to stop making purchases. And that reverberates throughout the world economy. But just because management at General Motors, AIG and Citigroup may not have done a very good job, doesn't mean small businesses don't know what they're doing. Their owners are alert and flexible.
The best of them are shrugging off the market decline, squaring their shoulders, and steeling themselves to navigate through the next six to 12 months of potentially slower demand.
Here are some tips to keep ahead of the curve:
Make sure that overhead is covered. That means first making sure you know what your overhead is and cutting it as much as possible. Then it's hustling, jumping, singing and dancing to make sure deals are getting done to cover it. Sure, some of the stuff sold, and some of the people buying aren't the ones we'd care to do business with when times are good. But times aren't good. So we do what we need to do to at least make sure that our overhead is covered.
Consider buying real estate, because now's a great time. Prices are flat or down just about everywhere. The stock market's volatile. But the real estate market, depending on location, is relatively safe. Interest rates are still historically low. And with the credit crisis easing, bankers are happy to loan money to people who can actually afford to pay back the loan, and with the real assets, to back the loan up. This might be a good time to become an owner rather than a renter.
If not, negotiate better and longer term leases. Landlords are squirming, rent rates are declining, and the real estate market has softened. Some businesses are going out of business and/or filing for bankruptcy protection. Threfore, landlords are eager to fill space and business owners with a little savvy can negotiate some of the best real estate leases in a long time.
Keep your eyes open for the right human capital. For employers, it's a buyer's market. The unemployment rate continues to click up, as those poorly managed large companies shed good and smart people, ones who may be willing to work for a little less and be given more responsibility and opportunity. Smart business owners know that people are their greatest asset and the cost and availability of these assets has become more favorable.
Invest in your customer databases. We're seeing a big demand for customer relationship management and sales software. Small companies, so busy over these past few years keeping up with orders, now have the time to take a deep breath and reorganize their customer databases. They are using this time to update the data and make sure there are marketing processes in place to keep these customers updated and happy. These business owners are also investing in sales and service people. Now that they've seen the value in their customers, they're going to do everything they can to show them how much they care.
Invest in infrastructure. This may be a good time to make some internal investments, such as buying equipment, installing new fixtures, training people and improving processes.
We've seen big stock drops before. In 2000 it was techs. After 9/11 it was transportation. Now it's cars and high finance. While sympathizing with those that are suffering financially, know current conditions are not going to last. With every downturn comes the recovery. This is a good time to get ready for it.
This article was edited from a story by Gene Marks, CPA and owner of the Marks Group, which appeared in Business Week magazine. Penny pinching advice from Marks can be found at www.quickerbetterwiser.com.
Topic: Business Strategies
Related Articles: small business
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