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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.

Democracy (in the workplace)?

We have just witnessed an historic (can someone PLEASE explain to me why ‘historic’ has to have ‘an’ before it, and not ‘a’- i don’t get this grammar rule) Democratic event last night. The American people have spoken, and chosen Barak Obama. So, how do you run your small business? What kind of  leader are you? Dictator (aka “authoritative leader”), Participative or Delegative?

You must be thinking - me? Authoratative? Never! I’m a good guy, and i would never want to be a “bossy” boss! Well, before you dismiss this leadership style, keep in mind, that some of our greatest leaders  were authoritative leaders (ie, Patton, Trump, Vince Lombardi).  When would someone want to be authoritative? Consider your industry- if you are the expert, and you’re working with entry level or inexperienced employees, or maybe a “rougher” crowd (think construction, Armed Forces or the fishing industry)- the being a bit of a dictator may make sense. And if you are working in a detail oriented industry with picky clients (think painter or wedding cake maker)- then, pick away. You can’t afford to let your employees to learn on the job and potentially risk losing a client.

As your company grows, your employees skills will improve and you should begin to rely on them to make decisions and execute the plan. One of the greatest mistakes small business owners make is to immerse themselves working IN the business, rather than working ON the business. If you want to have the largest wedding cake bakery in the country, at some stage, your going to have to stop baking. As long as you are baking, designing, building (and handling bills, fixing printers, taking out the garbage) - you aren’t building relationships, developing procedures, managing your staff and growing your business. As your company grows, you’ll want to move in to the participative or delegative role. In order to do this, you’ll have to train your key employees to meet your standards, or invest in quality employees who you can trust, and in some cases, have better experience that yourself. Don’t underestimate the power of quality employees.

As you develop good employees around you, you’ll begin to delegate tactical tasks to them. However, ensure that they are accountable to you. I highly recommend you read “Mastering the Rockefeller Habits” . This will help you manage your team more effectively while maintaining your standards. We’ve started to implement these tips, and it’s had a huge impact on allowing me to focus on strategy, new concepts and business development along with managing our staff.

As you move in to the participative style, keep in mind, that if you ask your employees for their opinion, you sure better honor it. A quick way to frustrate employees is to constantly ask for their opinion and then always go your own way.  Not ALL decisions are critical. Give your employees some opportunites to OWN a decision and execute it. But, in the end, this is your business.  Don’t be afraid to step in when needed and make final decisions. This is YOUR BUSINESS.

Why Outsourcing Is Critical!

We just lost our internet and phones this morning. Being that this office provides the sales and support for our whole company, saying that we rely on internet and phones would be an understatement. We were frozen, leading to dozens of hours of unproductive time and probably dozens of frustrated clients who couldn’t reach us on the phones. Fortunately, all we had to do is call our networking support vendor, Bardissi Enterprises (covers Eastern PA and NJ)- and George Bardissi came out, found the problem, and fixed it. All part of our monthly fee. And later today, i expect my monthly report from our outsourced Accountant, Accounting Plus, who handles all of our books and billing.

There are some facets of business that i don’t know very well, including networking and accounting,and frankly, don’t think i want to become an expert in them. My business is best served by me doing what i do best (marketing, strategy, management, etc.) which shoud lead to growth in my company, and letting other companies focus on their areas of expertise and maintaining the business.

How can you determine what you should outsource? Here are some quick questions to ask yourself:

1. What are your priorities that will help your business grow that you have expertise in?
2. What is an hourly rate that your time is worth to you? $50 and hour? $250 an hour?
3. What obstacles interfere or prevent you from executing the answers to #1?
4. How much time do you spend on these obstacles?
5. Can you delegate any of these obstacles, or outsource them to an outside firm?

After analysis, you’ll probably find that if you are spending 5 hours per week on payroll, another 10 hours on accounts receivable and payable, then you may not be using your time wisely. Hiring someone full time may not make sense, so research and see if you can find an accounting firm that specializes in managing small business accounting.

Here are some additional tips to researching and hiring appropriate vendors:

1. Try to find at least 3 vendors before you make a decision.
2. A reference from another trusted business source is always helpful in making a decision.
3. Don’t just look at price. Get a feel for personality, reputation, length of term in business, expertise, availability and testimonials.
4. Try to negotiate a flat monthly fee that fully covers the service, rather than an hourly service. This will help you budget and set everyone’s expectations better. This is especially helpful for computer networking, which will force the vendor to prepare to prevent a catastrophe rather than reap the huge reward of spending dozens of hours on a big issue.

There is no question in my mind that outsourcing certain components of our business like payroll, accounting services and networking services have been some of the smartest decisions we’ve made.

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