SOHO Blog

Small Office/Home Office Blog

Getting Real: Hope is not a Strategy

Reality hit our company, Logo Design Guru in the 4th quarter, and clearly, logos and websites are not immune to some recessional affects also. Amazingly, we still managed to grow by over 25% in 2008, but so did our expenses. My business partner and i reviewed our profit and loss statement, found a way to make significant cutbacks, and developed a gameplan for how we can make additional cutbacks depending on how January turns out. As “hopeful” as we are for the future, and excited as we are about the company, the reality is, that no one has any definitive clue what the future has in store for our economy.

So what in the heck do we do? Here are 10 ways you get your company back to a break even point, and allow your firm to retain cash, which is critical.

1. Go through your P&L report item by item, and start eliminating any unnecessary expenses.
2. Be sure to review your credit card statements. I can almost guarantee you’ll find some recurring charge from a software company or some other service that you haven’t used in months.
3. If you have that employee who continually under performs, has an attitude problem, or doesn’t fit- now’s the time to let them go. It will not only help save your company, but probably simultaneously save you headache from having to deal with a frustrating employee.
4. Ensure all major purchases are approved by you or someone else on your staff that will scrutinize the acquisitions, and be comfortable saying NO.
5. Get everyone selling. If you have a support staff, train them to upsell clients. Anytime someone interfaces with a client, there is an opportunity to drive more sales. make sure they are compensated for it, otherwise, you won’t reap the ultimate benefit.
6. Start making some business development calls. Everyone is looking for incremental income right now, and this may be your “in” to get the meeting you’ve dreamed about with a large partner.
7. Cut back benefits. I’ve read some articles that recommend that companies cut back employees rather than benefits. However, if you feel you overcompensate for benefits, than maybe getting back to what is standard in your industry is reasonable, and would be accepted by employees
8. Equity for salary reduction. If you have a couple key employees that are highly paid, and you REALLY like and value them- maybe they’d consider taking a paycut in exchange for some equity. in the long run, it benefits everyone.
9. Across the board pay cuts. If you’ve been preaching (and you should have been) that you’re all in this together- than consider cutting everyone’s salary by 5 to 10% in lieu of layoffs. Most people would be happy to cut their pay rather than lose their job altogether.
10. Layoffs. No one likes to do this. But, if you wait to long because it’s uncomfortable, you could be jeopardizing your small business, and all the employees. Be sure to put aside personal feelings and your employees personal situation as much as you can. Review your employees and gauge who is the LEAST essential, who’s worked can be absorbed by others with the least interruption, and who gets paid the most.

Try to make the cuts once, and only once, so the employees will feel comfortable that they are a long term solution, and to preserve morale. Keeping an open dialogue and being honest with your employees will go a long way.

If anyone has any other ideas- post em here. We’re all in this together.

I SUCK!

First off, i have to say, I SUCK! Man, i’ve been overwhelmed keeping SOHOBlog.org updated the last 2 months, and I apologize. Trying to juggle Christmas with 2 little girls, end of year reviews, 2009 projections, business development, and do some serious soul searching for our company during this recession has kept me busy.  Unfortunately, SOHO has taken the hit. I’ll work a little harder to keep this updated, and i’m looking forward to providing some good information in 2009. Happy New Year’s everyone.

-CJ Witte

How is your Small Business Handling the Economic Crisis?

6 TIPS TO HANDLE THE ECONOMIC DOWNTURN

Friends, we are looking at an unbelievable financial meltdown right now, and i’m not sure that it’s really sunk in yet. We now have the highest unemployment rate since 1994, and my belief is that it will get significantly worse after an expected dismal shopping season. Right now, banking, real estate/mortgage, energy (oil) and retail are reeling, and I personally feel that we haven’t seen the worst yet. As our baby boomers have just lost 40% of their portfolio, many are looking for jobs or ways to generate income again. A friend/relative of mine who is a senior investment analyst felt that it would take up to 6 years for a full recovery from this disaster.  GM’s is about to go bankrupt (although, i bought their stock, i just can’t see GM going out of business!). As more people lose jobs, less money is being spent, and we are all affected. So, how are you preparing your small business?

1) Sounds simple, but DON’T PANIC! Your employees, and customers, need you to think clearly and lead your company. If you begin unnecessarily cutting costs and letting staff go, you could inflict damage on your company that isn’t necessary.

2) Build your business the right way. Something that i’m proud that our company, Logo Design Guru has done, is build a profitable business with no debt. We bankrolled our company on a shoestring in the beginning (quite painful), but now, we owe nothing. As we have become profitable, we’ve managed to save money for opportunities, and for tough times like now. This will allow us to ride out the tough times. Far too often I think that companies get cute with their business model and financing and build their business with investors before they have a solid model. As soon as the company has a hiccup- they’re gone.

3) Eliminate waste. Take a look at all your commodities, suce as merchant accounts, payroll services, phone company, healthcare services (although this is more sensitive), office supplies and “fun stuff”.  Take the time to renegotiate with your vendors, or change vendors.

4) Be open with your staff. Let them know the financial status of the company. It’s ok to tell your employees that raises are frozen as a result of the economic conditions.  No one likes surprises. Also, look closely at your staff. Maybe you’ve had a pathetic employee that you didn’t have the heart to let go. Well, now’s the time, unless you want to allow those “anchors” weigh down the whole company. Of course, be sure to let people go “properly” and give them a fair severance.

5) Plan! Work out several financial scenarios, “if we make x amount, where can we cut costs?”. This way, you have a plan in place, and you simply have to execute that plan rather than freak out when your sales are lower than anticipated.

6) Look for opportunities! Don’t stop marketing, in fact, get creative and aggressive with your marketing. Look for opportunities to build new relationships, as other companies will be looking for new sources of revenue also. If you can ride out the bad times, you should be able to pick up market share and come out smoking when this mess is over.

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