With anemic growth rates and tight lending conditions, it’s pretty obvious that these are tough times for all businesses, small businesses included. Between 2007 and 2010, small business failure rates have climbed by nearly 40 percent, according to recent research.
There are things that small business owners can do to help their businesses survive and thrive in hard times like these. The key factor is finding new efficiencies in your small business operations and optimizing your current operations. The following is a list of hard times tips for small business owners looking for a way to prosper in a difficult economy.
1. Form alliances with other businesses – You can save a lot of money by partnering with other businesses to share resources and cut costs. For example, if your business is great at website design but not so great at distribution, by providing website maintenance services work for a business that provides you distribution services, you can reduce your costs and take advantage of another business’ existing strength in an area instead of having to try and develop your own.
You can also share customer databases with partnering businesses, allowing you to generate leads more easily. This can be an invaluable source of new customers for your business.
When choosing businesses to partner with, you likely won’t want to partner with local competitors, as a competitor could unfairly take advantage of the arrangement to pilfer customer lists or take proprietary information from your business, such as manufacturing or service secrets. For distribution partnerships, working with local competitors may be acceptable, so long as the terms of the partnership are very explicit and put in writing. When choosing businesses to partner with, you should be careful to have non-compete agreements to keep your partner from shifting tactics to move in on your niche.
2. Reconnect with former customers – Go through your customer database and track down customers you haven’t heard from in a while. Inform them of new products and promotions by your business, and offer them a discount if they’ll stop by. If your customers haven’t shopped with you for a while because they were displeased with your business’ performance or service, address their concerns and bring them back into the fold. Taking care of their concerns will get them back in your customer base and head off any bad word of mouth displeased customers may be spreading concerning your business. Connecting with old customers may be easier and more cost effective than trying to find new ones.
3. Location – Some parts of the country are hit harder than others by the recession. California and Mississippi have some of the highest small business failure rates in the country, while other areas, such as North Dakota, Wyoming and Iowa have some of the smallest failure rates in the nation. If you’re starting a small business and have a variety of state location options, consider looking at the stats for your state before putting out your shingle there. If you’re able to locate in a more prosperous area, you may want to do this to boost your small business’ chances in the current difficult economy.
4. Boost your public profile – Get involved in your local Chamber of Commerce and local civic leagues. Host events at your business and contact your local newspaper or television or radio station for coverage. Any mention your charitable work may receive is free positive publicity for your and your business. Also try to get speaking engagements and make public presentations, as this will allow you to meet and network with other small business owners who can provide you with invaluable advice.
5. Sit down with the books – Go over your financials with a fine-toothed comb. Look for ways to cut your variable costs and also consider whether refinancing existing debt may help your business. Interest rates are at all-time lows, and while credit is hard to come by in the current market, a refinance loan can dramatically reduce your monthly debt payments, allowing your business more breathing space. By rooting out unnecessary costs and reducing your debt burden, you can make your business more competitive.
6. Aggressively market your business – Even if you have a shoestring budget for marketing, getting the word out about your business is important, especially in hard times. Consider unconventional guerrilla marketing strategies such as publicity stunts, walking billboards, t-shirts or other low-cost, high-impact methods of marketing. Get on Facebook and Twitter and leave a few reminders about specials and deals at your business. Social media sites are the most trafficked sites on the Internet, and you’d be surprised at how much a simple reminder of an event or bargain at your business can result in increased customer visits.
7. Make personal connections with your customers – One advantage small businesses have over their larger competitors is the ability to offer highly personalized service. Leverage that advantage as much as you can by reaching out to your customers personally. Take the time to send Christmas and birthday cards and also greet and chat with customers when they visit your site. Establishing a positive rapport with your customers can help keep them loyal and coming back to your business.
8. Purge your product or service line – Examine each product and service you offer and find the ones whose profitability is negligible or are unprofitable. If eliminating these offerings doesn’t interfere with your other business, you may want to cut them. Whittling down your product or service offerings allows you to refocus your resources to concentrate on better-performing products and services. If you’re not quite ready to give up the ghost on certain products or services, consider packaging them with more popular products or services. This allows you to get them out of your inventory, and can also help you capitalize on the popularity of another product to promote the less popular product.
9. Workforce reduction – Layoffs are something most businesses don’t want to consider, but cutting a few jobs is better than cutting everyone’s job if your small business goes under. If your volume of business doesn’t justify your current staffing levels, and recovery does not seem imminent, you may need to adjust your labor force to reflect the reality. When reducing your workforce, you’ll want to carefully review your workforce to determine which job cuts would have the least impact on your business. Be sure to follow all state and federal laws with regard to terminations, and also be sure to follow all terms imposed by contracts or collective bargaining agreements.
By taking the necessary tips to ensure your small business’ health in hard times, you can weather the storm caused by the financial meltdown of 2008 which the country is still recovering from and avoid becoming part of the small business failure rate. While workforce reductions and refinancing debt can be tough decisions to make, when your business emerges leaner and more competitive, you’ll know you made the right call.