For a small-business owner, surviving in a tough economy can be ... well, tough. To make it a little easier, try these survival tactics:
1. Understand that cash flow is king.
As a small business owner, you must know how your cash flows. This isn’t fancy accounting; it’s simply tracking how cash comes in versus how it goes out. Take two hours and use your QuickBooks or check register to get a grasp of this monetary movement.
2. Trim the fat.
Many small businesses experienced a tremendous run in the last 10 years. Since they had good cash flow coming in the door, they allowed fat to accumulate in the things going out the door. Now is the time to look at where your money is going and eliminate unnecessary items. This includes the business Hummer, that expensive copier lease and the T1 connection instead of basic cable modem. You also may need to make some tough decisions about eliminating employees. It’s critical that you get your cash outflows to a manageable level ASAP.
3. Look into the future.
When clients and projects were rolling, most entrepreneurs believed that new business would materialize whenever things temporarily slowed down. Those times are gone. Analyze what money is coming in during the next three months, from where and when. Compare this to the new cash outflows that you assessed in the step above. If things are tight, that’s fine; if more is going out than coming in, trim more and find additional income. Do this exercise each month, always looking at least three months out.
4. Get back to basics.
When you first went into business, you may have had to fight and claw to make ends meet. Make a list of the things you did back then to bring in revenue. You probably moved away from many of those strategies when business improved—this is the time to aggressively return to them.
5. Avoid the temptation of credit.
It’s tempting to use debt and credit cards to borrow your way through slow times. Unfortunately, since no one knows how long this slump will last, borrowing may result in the demise of your business. Say no to using credit cards or the equity in your home and any other type of borrowing. Resolve that you’re going to scratch and claw your way through this using the cash flows of the business. You’ll come out stronger in the end.
