What measures should small businesses take to weather this economic downturn?

Chad Moutray, Chief Economist for the U.S. Small Business Administration posted this question on Linkedin.com. First and foremost, small business, which accounts for 80% of the US economic base, should not be discouraged! But, you do need to be a savvy business person. See my recommendations below:

As a small business owner that employs 10 people and a business consultant, there are a few key steps any small business person should take to weather this economic storm:

1. Cut the fat. This is the hardest thing for a small business person to do because close relationships with vendors and employees make this very personal. However, the health of the business depends upon keeping operations as lean as possible. The one area that should not be cut is marketing. However, scrutinize where your marketing budget is being spent. Are you really getting any response from that yellow pages advertisement? Figure out where you are getting return on your dollars spent and focus your spending on these marketing channels.

2. Focus your time and energy. Are you really creating benefit by attending Chamber and service club events? This is the time when you need to focus your energy in events that your potential clients attend. Get back to the basics of your business and mind your schedule.

3. Take a good look at your financial situation and make necessary changes. This is usually the last activity a small businessperson wants to spend time on and would much rather spend time on getting their product or service out the door. However, these three areas are crucial to your financial health:
a. Understand your profit margin on every unit produced by your company, whether it is by hour of service or each widget manufactured or assembled. This is the time to get the exact truth of your profit margin

b. Analyze your P&L statements weekly if not daily and make necessary adjustments. For example, we have looked at whether it is more cost efficient for our company to reimburse at the Federal mileage rate or allow employees to fill up their gas tanks. Be creative and make sure the business is gaining an advantage by what ever you chose to do.

c. Pay down debt if you are able and negotiate with your creditors to reduce interest rates and payment terms. Everyone in business knows its tight right now. Cash flow is one of the hardest issues for a small business. The credit crunch makes short term borrowing even harder to accomplish. If small business owners and vendors can work out suitable terms among themselves, it will help ease the impact of bank’s inability to serve your needs.

4. Visit your community banks and see if there are programs for financing for which you qualify. Even though we are in a credit crunch, and truthfully, most small businesses are not eligible for loan programs anyway, don’t give up on keeping a tight connection with your banker. Look for a conservative institution! Our problems started with lending institutions playing fast and loose with their assets. The conservative institutions are weathering this storm. Stick with them.

Above all, don't let the media drag you into a depression! They make their money on sensationalism. Stay focused on your core business value proposition. If you need assistance in determining what that is, get in touch with me and I'll help you figure it out.

The Workforce in America

Aren't you tired of people telling you that Americans don't want to work? I know that there are the few people who have an entitlement attitude or those who are physically, mentally or emotionally unable to work. But, the epidemic of non-workers described by the media and our elected officials in order to justify the use of undocumented workers (they used to be called illegal aliens), is a slap in the face to the American spirit and culture.

When my ancestors emigrated from Europe, there were no questions as to whether they would follow the rules. There was a process for entering the United States of America and if you wanted to stay, you followed the process, no exceptions. We are now faced with a societal mentality and culture that wants to make an exception for everyone who enters, regardless of the means. Not all of my fellow citizens want to make these exceptions for altruistic reasons. We have to ask if the politicians who support amnesty are looking for votes. This is short sighted. Eventually, this depletes the tax base from both sides of the equation, revenue and expenses, because the tax revenue is depleted and the cost of services rises because we are forced to take care of illegal families who require health care, food, education and housing subsidies. Believe me, they are receiving more than the tax-paying US born citizenry.

And what of the business people employing undocumented workers? These business owners are using these people like slave labor; paying them little money and offering no benefits. This action sets an unrealistic expectation for price for clients and consumers and sets an un-level playing field for competition. Meanwhile, the business owner who is not paying their fair share of taxes, Workman's compensation and other benefits makes more money for him/herself and causes legal businesses to suffer and leave the marketplace, so its not good for the local economy.

The American worker must stand up for what is rightfully theirs and make their voice heard. Insist that the laws of the land are enforced as written. If they are unclear, force your politicians to make them clear. This is a great country to live in, but it should be great for everyone, most importantly the law-abiding citizens. Do your part and take a stand on this issue. Its time.

My first Blog

I can't beleive I've joined the blogging nation, but here I am!

I want this blog to be dedicated to issues facing business in the United States. If you are outside of the USA, please still feel free to participate, particularly if you want to know more aobut the business climate in America. Right now, there are many issues staring American business owners and employees. I've posted a survey to find out what you think the issue most impacting your business is in today's economy. There are so many to choose from! But, in this election year, when I have every candidate with the exception of the dog catcher asking me for money, I want to respond and say, "Hey Mr or Ms. Politician, American business is hurting from this issue the most and you need to pay attention and not just come to me with your hand out!" So, let me know what you think. I'll be changing the surveys regularly.

I want to answer your questions too. If the answer is not in my business repitoire, I have a vast network of experienced business people from many different industries. I'll ask them to provide their best advice.

Most of all, I want to offer a place to share my experiences and my latest projects. Oh, and yes, I want to share the human side of business the most. We are all people with families and personal stories, whether triumphant or sad. Here is a place to be human in our daily lives. That encompasses many topics. Hope you stick around and enjoy the blog!