Small Business Owners In Booming Economy, "What, Me Worry?"
When business is booming due to the economic cycle, many small business owners don’t take the time to find out if their organization is running at maximum efficiency. Wasteful practices arise but are seldom mentioned in the rush to deliver the product on time or employees ensuring incentive targets are met. Worse, they may not be addressed for fear of agitating the bliss of employee morale, which could lead key personnel to seek employment elsewhere.
Yet, when business slows, there is a rush to re-evaluate business operations, formulate new strategies, and rely on innovative (and unproven) resources to help improve the efficiency of your business. Think this shift and urgency goes unnoticed by employees?
Here are some central issues to consider as part of continuous planning for your business, which should improve your company’s chances of success when economic times change.
Where can costs be cut?
This may seem like an obvious question, but formulating the right solutions without impairing your operations is not easy. Look for large and small ways to economize, without changing vital areas. For example, it may be possible to reduce the number of vehicles used or outsource common tasks while shifting current employees to enhance their skill sets for new projects. Now may be a good time to revisit some of your agreements and possibly negotiate a temporary or long-term discount. Consider taking advantage of bargains by buying in bulk or locking in prices for the future.
Are the marketing strategies still relevant?
The marketing approaches your firm uses now may be less effective under tighter conditions. Clients may be more cautious about commissioning projects, and they may want greater reassurances that they are getting quality and value for their money. While it may be a struggle to increase your marketing budget, well-targeted advertising campaigns can go a long way toward bringing in new business and retaining existing clients. Increasing your networking efforts, both in person and online, is a low-cost option for attracting new customers and staying in touch with existing clients.
Are the prices right?
While tempting to raise prices in a strong economy, be thoughtful first in two areas: first, the relative nature of the increases to inflation and value received by clients and second, can you currently see the need to lower your prices in the face of a declining economy? If perception is greed or not being worth it, the long-term effect on your business can be painful.
Conversely, you may need to reduce prices due to technological advances or growing commoditization of your services. Instead of lowering prices across the board, you may offer select discounts or incentives to attract and retain customers. If your customers agree to adjustments in the scope of the work or types of materials used, it may be possible to lower your prices while still maintaining profit margins.
Able to trim payroll without losing key employees?
Some companies start laying people off at the first signs of an economic slowdown. However, this can prove to be a dangerous overreaction, especially if your business ends up losing its most valuable employees. If you need to reduce payroll costs, consider viable options for doing so without letting good people go, such as offering flexible schedules, time off for training, or reduced hours for employees who want them. If possible, look at rents and ways to reduce office space. Consider beta-testing virtual offices, where key employees are given a day to work from home each week and in time increase the number of days each week, to eventually the option to share offices with other virtual employees. Measurement of productivity, connectivity and morale need to be constant, as this isn’t for everyone.
How to maximize cash flow?
When funds are tight, keeping track of cash flow becomes especially important. Check that your invoicing processes are operating efficiently, and that outstanding accounts are managed quickly. Before obtaining credit becomes more difficult in a tight economy, be proactive now by meeting with your trusted financial partners and lenders to review credit lines, ways to improve your company’s credit score, and the options available in case of emergency.
Is it time to try new technologies?
Implementing new software and technologies into your business operations is a complex and sometimes arduous process. Making the time now to allow your firm’s staff to familiarize themselves with IT solutions that can help your business operate more efficiently and leaner. When better times return, your firm will continue to benefit from the productivity and margin enhancements.
Improve oversight and value-add content on your website and social media, ensuring that the information is up-to-date and professionally presented. Investing time in enhancing your online presence now creates a history where clients (and prospective clients) can see professional, value-add content during both good times and bad.
Adapting to change is never easy. But, neither is running a business. Rather than focusing on the how good things are now and how much longer it can last, focus on becoming leaner and more adaptive than ever.
Please call me at (508) 834-7733 or directly schedule a meeting to learn more about how as CFP® and fee-only fiduciary I’m able to help small business owners with ongoing financial planning that doesn’t require investment management.
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