During the last few weeks I've received letters and comments from business owners that reflect their uneasiness with the economy and the potential for another “dip” this winter. They worry that “things are really going to get bad again” but they don’t exactly know how or when.
One business woman asked, “Is it better to try to prepare for some worst case scenario or just wait until it happens and deal with it then?”
Years ago, during a similar period of economic uncertainty and sluggish growth, I read an expansion business plan written by a gas drilling rig equipment owner. It was a bold plan especially when U.S. gas drilling had stalled out because of declining prices. When I asked the owner why he believed his business could survive, let alone succeed, he said something like this.
"My advantage is my attitude. All of my competitors are complaining about the market and waiting for it to turn around. In the meantime, there are still opportunities out there and I will be the only one pursuing them. If you think the market is dead then soon your business will be dead.”
I agree. It is dangerous for business owners to adopt a turtle-like “wake me when it’s over” mentality.
Here are some recommendations to replace angst with business building activity.
No. 1: Seek more customers. In the spirit of the rig operator, now is the best time to go out and pitch new customers. So what if the sales cycle (the time it takes to solicit and receive a first order) may be longer than in years past. Owners should spend at least one day a week pursuing new customers.
Here’s another benefit of initiating a new sales campaign. Your employees will be inspired by your confidence and commitment to resist defeat.
No. 2: Evaluate business weaknesses. Owners should ask every employee or manager the following question. What sudden single event would be heart stopping bad news for your department? It could be the loss of a the top sales rep to the competition, loss of a big account, loss of a production source, loss of a bank credit line, etc.
Once the owner has identified the top areas of vulnerability throughout the company, then the entire staff can work together to come up with action steps to reduce the company’s areas of vulnerability. Not only will the business benefit from the proactive steps taken, but employees will feel more productive addressing problems than worrying about them
No. 3: Watch customer payment patterns closely. If commercial banks increase borrowing costs to small business owners or cut off their credit entirely, then owners can expect another nasty slow down in bill paying around the country. Owners should also watch out for customer over-ordering with no intention to pay on a timely basis.
No. 4: Prioritize payments. For business owners in extreme cash flow distress, it’s worthwhile to establish bill paying priorities. Salaries and payroll taxes should always come first. If owners don’t make timely payroll tax payments, interest and penalties can mount up quickly. Plus, owners are personally responsible for these payments even if their business is structured as a corporation or limited liability company. Next, owners should pay obligations that are backed by a personal guarantee, such as credit cards.
Yes, attitude and actions do matter. If startup entrepreneurs and business owners pause too long, they make it easy for their competitors to pass them by.
Susan Schreter is a 20-year veteran of the venture finance community and a university educator in entrepreneurship. Her work is dedicated to improving startup longevity and operating performance in rural, urban and suburban America. She is the founder of www.takecommand.org, a community service organization that offers the largest centralized database of startup and small business funding sources in the U.S. Follow Susan on Twitter @TakeCommand.