By Peter Fretty
REGARDLESS OF HOW experts spin their
outlook on the economy, most agree that
rough waters still lie ahead. After all, consumer and corporate spending is down across
the board, meaning proportionately fewer
opportunities to win business.
Unfortunately, small businesses are often
hit the hardest. However, this should not necessarily mean a gloomy forecast. Through
planning and taking a few proactive steps, it
is possible for progressive firms to weather
Business owners should devise a plan
designed for success, explains Costco member John Reddish, president of Advent
Management International Ltd. in Drexel
Hill, Pennsylvania. “Small-business owners
need to plan for the tough times by identifying contingencies. It all starts with identifying what discretionary expenses can be cut
without compromising product [and] service integrity,” he says.
Specifically, Reddish suggests making
prudent arrangements with business partners. “For instance, the lines of communication with lenders and suppliers need to
remain open. This is the time to look for
ways to improve terms, while avoiding the
use of credit-card lines.” Although it is
unpleasant, you also need to consider payless
paydays for key staff and develop a redundancy priority list.
Bill LaFayette, vice president of economic
analysis with the Columbus, Ohio, Chamber
of Commerce, stresses the importance of taking the time to reevaluate operations as well.
“A business model established during good
times may not still apply,” he says. “While
some think of formal planning as an exercise
the bank requires, it has real value in that it
spend money on ‘fuel,’ whether that was in
the plan or not,” says Kevin Armstrong, fran-
chisee head of The Alternative Board in
Vancouver, British Columbia, an interna-
tional business advisory organization.
Essentially, success in tough times is a
matter of being in tune with market demands,
enacting a proactive plan and understanding
what areas require focus. No business can
afford to overlook the following three areas
of concern in a tight economy.
Controlling spending. Understandably,
cost cuts often come to mind as the quickest
way to scale a business for tough times.
However, LaFayette warns business owners
against making hasty decisions. “The process
needs to be strategic. You need to think about
the implication of a cut and whether or not it
[will] cost more in the long run than it is saving,” he says. “For example, eliminating support staff for the sales team is not smart if it
forces the sales team to spend an inordinate
amount of time on administrative tasks
rather than selling.”
Improving service. Even if you elect to
fight for business in new markets, the quality
and frequency of existing customer interactions cannot slip during tough economic
times. “Instead, increase your touch points
with active customers to ensure visibility,
which may mean maintaining industry presence and participating in activities. Demonstrate you are there to stay. In some markets,
competitors will savage the weak, but keeping your profile doesn’t give them much to
work with,” Reddish says.
“ One way to help support the outlay of
r esources is to focus on high-profit product
[ and] service sales, on-time delivery and sales
s upport. The point is to avoid giving custom-e rs any reason to look elsewhere.”
C larifying position. In a down market,
there is obviously less business to win, so it
i s important to understand and clearly
d efine your business’s niche and approach.
This is a time to truly reflect and improve.
As Armstrong advises, pretending to be an
equal to the big names is a dangerous
endeavor. “This is a death trap for small
businesses because they lack the brand
awareness and cash flow of large firms,” he
says. “Small businesses that thrive identify
marketing initiatives that are [compara-tively] inexpensive and very effective. For
example, look towards strategic alliances,
search-engine strategies, referral programs,
trade shows or other types of marketing
that get you in front of the prospect.” C
forces one to think strategically about running and developing the business. It also gives
guidance for the appropriate response when
events like an economic downturn pop up.”
Of course, planning alone does not dictate smooth sailing. “You can make all the
plans you want, based on all the assumptions
you can think of, but if the wind isn’t blowing, you might have to drop the sails and
TH IS THREE-STEP PLAN outlines a work-
ab le framework to control spending. The
ke y is to have enough detail to make
d ecisions, but not so much that the
complexity deters action.
Identify. Detail both the fixed and
flexible monthly expenses that the business incurs in generating revenue.
Remaining cognizant of actual expenses
is instrumental in identifying where cuts
Project. How much income do you
expect to earn from the planned
expenses? Use short- and long-term history to help develop profit estimates.
Pay close attention to how each sale
relates to individual expenses.
Repeat. Success comes by frequency and consistency, so repeat the
process regularly, making adjustments
as the market demands.—PF
t i psurvsival
Based in Michigan, freelance writer Peter Fretty
regularly writes on small-business issues, high-tech gadgets and travel destinations. You can
reach him at