With growing evidence that the economy is slowing, many savvy small-business owners have adopted strategies that will help their companies weather a downturn.
A mixture of foresight, creativity and adherence to good business practices can help a company mitigate the damage from a slowing of their sales or a reduction in their profits. Perhaps the most important thing owners can do is maintain good relationships with customers.
Mark Stevens, a small-business owner whose work includes sales consulting, said owners need to already have in place a culture that encourages everyone in the company to treat customers as family members, not just part of a business deal. Getting to know your customers well gives you a better chance of holding on to them when business slows.
“The vast majority of people don’t say, ‘tell me something about you,’ ” said Stevens, CEO of MSCO, located in White Plains, N.Y. For example, if you run a travel agency, Stevens suggests calling a customer several months after a trip to ask how it went.
Stevens also advises making sure that your sales pitch – or those of your salespeople – is short and to the point. Again, know something about your customer or prospective customer. “Not being educated is a good way not to get a sale,” he said.
Letting customers know you’re not out for their money can be a big help toward building a good relationship.
When Singlefin, a company that provides e-mail and security services for small businesses, was founded, it was 2001, the depths of the high-tech bust. CEO Troy Saxton-Getty says the founders built the company on a model that would help protect it during a downturn.
Singlefin, based in Cardiff by the Sea, Calif., offers free anti-spam and anti-virus services to small businesses, with more advanced services for paying customers. Saxton-Getty said about 60 percent of the customers who sign up end up choosing the paid services.
“Things were pretty nasty when the business got started,” he said. “That’s when the idea of the free service came up.”
Offering customers or prospects an incentive improves your chances of getting more business when times are better.
“We’ve actually talked about that from an economic perspective,” Saxton-Getty said. “We talk regularly about a downturn and how we could do additional things to make it more palatable” for customers to sign up.
Running a company according to sound business principles will also help you weather a downturn, simply because you’ll be in a strong position when sales start to slip. Michael Kogon, CEO of Definitions 6, an Atlanta-based business consulting firm, suggests owners take steps to strengthen their balance sheets, for example, by paying down debt. And, he said, make sure you have credit facilities available – get them during the good times, when credit is easier to obtain.
“Don’t look for money when you need it,” he said. “When the rain starts coming, no one has an umbrella.”
Kogon also recommends cutting back where possible on leased equipment; buying rather than leasing means you have fewer monthly obligations.
Definitions 6 has prepared for a downturn by using independent contractors along with full-time employees. That way, “we can withstand a 20 percent drop (in business) without cutting staff,” Kogon said.
Cutting costs is, of course, something all businesses resort to during slower times. One way is to put off purchases; another is to shop around for cheaper vendors.
Another option is buying as part of a group. There are small business co-ops that can help owners buy all kinds of supplies and equipment for less, simply because they can benefit from economies of scale.
Some owners, as part of their business, offer similar advantages to other companies. HouseRaising, a home builder in Charlotte, N.C., uses software to help itself and other small builders get projects done faster and more cheaply, according to Bob McLemore, the company’s president.
McLemore said the other builders, some of whom turn out just a handful of homes a year, end up partnering with HouseRaising. They can buy materials, appliances and other goods as part of a group – “we connect buyers to vendors committed to a fixed price,” he said.
Although the housing market is slowing, McLemore said his company is doing better as other builders look for ways to weather the downturn.
Joyce Rosenberg writes about small business for the Associated Press.
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