Small Business Management: Slowing Economy Presents Special Challenges, Part 1

As the U.S. economy appears to slow down, many small business owners confront new challenges. Unlike corporations, small businesses rarely have the resources to monitor and take action for every issue and trend. Even those owners who have weathered numerous business cycles may meet new circumstances that frustrate their otherwise successful instincts and experience. In the first part of this series, I’ll share with you some advice offered by SCORE “Counselors to America’s Small Business.”

Business owners can take a number of steps that will help them overcome the worst of times and achieve success when conditions inevitably improve. Here are some tips on how to deal with a slowing economy.

• Consult your bank about your business’s financial status. Lenders have valuable experience with economic cycles, and they can advise you on issues specific to your business and industry. It also may be helpful to arrange a line of credit. You may not need it for several months or at all. If a lag in cash flow occurs, though, you will have a ready source of bridge money in place.
• Make sure you have good relations with your creditors. You may find it necessary to renegotiate terms, but overdue bills and inconsistent payment practices will not help your position. Your creditors may be experiencing financial difficulties as well. Any flexibility will hinge on whether they perceive you as a reliable partner, or as a risk.
• Keep a close watch on your receivables. Follow up with anyone who owes your company money and make sure they are meeting their terms. Be firm when dealing with problem accounts, but also be willing to negotiate when appropriate. It may take only a matter of months for a struggling customer to become a stable source of income. If you can accommodate such situations without adversely affecting your company’s financial position, everybody wins.
• Review your operations and expenses on a regular basis. If you monitor your profitability on a monthly basis, you may want to do it weekly or biweekly during slow economic times. Review your business plan more often. Monthly or quarterly reviews will make it easier to make adjustments and keep your business on track.

In the next part of this series, I’ll reveal more tips that can help you deal with today’s economy and your business.