Staying Alive

SMALL-BUSINESS OWNERS have been watching the economy evaporate in front of their eyes. Stress isn’t the word to describe what many of these owners feel. If the slowdown continues, not only will their nightly tossing and turning get worse, some may have full-blown nervous breakdowns. Fortunately, there are ways to lead better lives by running better businesses. Following are 10 survival tactics in a tough economy:

1. 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. Set aside some time each week and use your accounting program or check register to get a grasp of this monetary movement.

2. TRIM THE FAT. Many small businesses experienced a tremendous run in the past 10 years. Because they had good cash fl ow 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. Th is includes the business Hummer, that expensive copier lease and the T1 connection instead of a basic cable modem. You also may need to make some tough decisions about eliminating employees. It’s critical that you get your cash outfl ows to a manageable level as soon as possible.

3. LOOK INTO THE FUTURE. When clients and projects were rolling, most entrepreneurs believed new business would materialize whenever things temporarily slowed down. At least for the time being, those times are gone. Analyze what money is coming in during the next three months, paying specifi c attention to when and from where it is coming. Compare this to the new cash outfl ows you assessed in the previous step. If things are tight, that’s fi ne. If more is going out than coming in, trim more and fi nd additional income. Do this exercise each month, always looking at least three months ahead.

4. GET BACK TO BASICS. When you fi rst went into business, you may have had to fight 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. Th is is the time to aggressively return to them.

5. AVOID THE EVIL TEMPTATION. It’s tempting to use credit cards to borrow your way through slow times. Because no one knows how long this slump will last, borrowing may result in the demise of your business. Say “no” to using credit cards, the equity in your home or any other borrowing. Resolve to scratch and claw your way through this downturn using the cash fl ows of the business. You’ll come out stronger in the end.

6. BE PREPARED FOR EMERGENCY. You must have cash reserves as a cushion for bad times. If you have any extra money right now, create an emergency fund that equals one, two or three months of your cash outfl ows. Put this in an account and don’t use it unless it’s a life-or-death situation for the business. If you don’t have cash now, do everything you can to build up such a reserve.

7. WORK WITH YOUR BANKER. Your banker probably is as scared as you are. If you’re having trouble keeping up with your obligations, develop a concrete plan for getting cash flows back in shape. Use the steps above to create the basics for the plan and ask your accountant to help you format it. Once it’s complete, clearly communicate the plan to your banker and ask him or her to help you implement it. If it’s a quality fi nancial institution, your banker will want to see you make it and will help you any way he or she can to survive in these troubling times.

8. REMEMBER WHO LAYS THE GOLDEN EGGS. Don’t forget who’s paying your bills right now—your customers. Although you want new business, it’s imperative you take care of your existing customers. Your competition is desperate and may try anything to lure your customers. Call your clients yourself, ask them how they’re doing and if there is anything you can do to help them. Ask if they’re happy with your service and how you can provide an even better experience going forward.

9. IF YOU DON’T WORK ON THE IMPORTANT THINGS, THE IMPORTANT THINGS WON’T GET DONE. Many business owners are in the same predicament as you are. Th e ones who survive will do so because they’ll follow this guidance as soon as possible. You must make time to work on your cash fl ows and improve the customer’s experience now. Set aside a full day within the next week to work on the previous items without interruptions and excuses. You might even consider a Sunday when things are quiet.

10. DON’T STRESS. The diff erence between which businesses get through this slowdown and which don’t has a lot to do with the decisions businesses make. To make great decisions, you must think clearly. When you’re stressed, it’s nearly impossible to make big decisions and show the leadership needed to survive. Some suggestions to lower your stress level include exercise, yoga, outdoor activities with your family, or even a daily 10-minute relaxation CD that walks you through deep breathing and stretching. Anything that allows you to get your mind off things and relax is good. Entrepreneurs have a sink-or-swim, door- die mentality. Focus on the right things, and you’ll get through this.

Thomas E. Houck is a speaker, author and consultant whose book, Th e Top 10 Mistakes Business Owners Make (and how to fi x them), helps business owners develop strategies to lead a better life by running a better business. He can be reached through www.heritagebusiness solutions.com or by calling (561) 514-6567.