With recession hitting nearly every country in the West, the small businesses are likely to bear the worst brunt of the credit crunch. Small businesses unlike their big brothers often risk everything on one endeavor and without any escape route suffer greater losses. However, experts feel that a fair amount of prudent business practices could enable small ventures to remain afloat even in the worst economic circumstances. The simple mantra for any company to tackle the plummeting demand would be efficient management of cash, building customer confidence and creating new opportunities.
Daniel Morales, director of the San Gabriel Valley Small Business Development Center, Brandon Shamim, chairman of the Los Angeles Area Chamber of Commerce’s Small Business Council and the American Institute of Certified Public Accountants have the following tips for small companies to survive economic downturns:
• Check your balance sheet and income statements to look for areas from where you could avail extra cash.
• Consider restructuring your credit and sign up for fresh credit to meet your future working capital requirement. You should go for a new loan only if you consider your company to be in sound condition or else loans would compound your problems.
• Manage your inventories by shortening the inventory cycle. Your aim should be to clear the shelves as early as possible. Have a sale to move the obsolete inventory.
• Make sure that your clients clear their payments as a lot of cash would be tied up in unpaid receivables.
• Try to reduce expenses by cutting down on lavish unimportant expenditures.
• Upgrade technology as it might often cut down costs.
• The most important thing perhaps is to maintain a good rapport with customers and try to win their confidence in your products.
The common cost cutting method the small businesses follow is laying-off their employees. However, rather than reducing the workforce, now is the time to add incomprehensible incentive programs to your compensation plan. In fact, this is a nice time to hire the talented employees your rival firms have fired because in order to tackle the recessionary force you should outsmart and outdo your competitors.
