The Credit Crisis and the Small Business Owner -
How to Survive and Thrive in the Coming Years
By: Shane Barber
The credit crisis has affected every segment of our economy, but maybe none as severely as the small business owner. As a small business owner, you use credit as a means of survival to finance everything from inventory, to shipping, to payroll - now that credit is something less than easy to come by, you may find yourself struggling to keep your operation going.
As a small business owner you are the most efficient engine of job creation in this country, and it is true. Unfortunately, it is becoming more and more difficult for people to continue in that role. You all have targets on your back, which your least favorite uncle is taking aim at, and you have an increasingly unsympathetic banker whose appetite for risk has been severely diminished or even completely sated. What are you to do when you find yourself in this situation?
1. As unpleasant as it may be, you may have to learn to run a little leaner then you have become accustomed to. That might mean fewer employees or less inventory. If you have the ability to use it, just-in-time delivery can save you a lot of money in the long run. You have less carrying costs and you may be able to operate out of a smaller space. Whatever form it takes, running leaner is always preferable to closing the doors.
2. This is where your time spent will pay off in spades. Do your demographic homework if you have not already done so. I cannot stress enough how important this will be for your future. You simply must know, especially if your business sells direct to the public, who your customers are, and how many of them are in your geographic area. You should be fully aware of the average age of your customer; the typical salary of your customer; how many people who have the same age and salary demographic of your customer are in your area; and if that population is on the rise or in decline? In addition, you should know when and why these people are spending money with you. If you can't answer these questions, you are flirting with disaster. The trend toward less consumption is not one that is likely to reverse itself anytime soon, so it is critical that you be able to reasonably and realistically forecast demand for your product or service from this day forward.
3. Use the demographic information you obtain to craft a plan to either attract more people like your average customer, or to plan your inventory according to the demand forecast. You have to take "hope" out of your vocabulary and replace it with "know." Obviously there is no crystal ball; the more information you have, the closer to "know" you can get.
4. If your business relies on maintaining a presence in front of a potential buyer for an extended period until a project is approved or a buying decision is made, do NOT make the mistake of having that be one of the places where you trim your budget. In those situations, out of sight truly is out of mind, and you cannot afford to let those opportunities go in today's economy. They are considerably rarer than they were just 18 months ago. This is an investment in your business future that will pay handsomely.
5. Use the credit lines that you have today judiciously. With banks continuing to tighten their lending standards you don't want to give them any reason to refuse you when you absolutely HAVE to have more funds, or when the demographic information for your customer base indicates that you can reasonably expect business to pick up in the near future. This will keep you in the best position to accelerate your business ahead of your competition when things finally do turn around.
Finally, remember that this too shall pass. When the dust settles, there will be fewer players in every business segment, and the strongest will emerge even stronger. There are a lot of people depending on you, and you have invested your life in your business. Make sure that your business returns the favor to you, and that those depending on you are taken care of by following these five pieces of advice.
About the Author:
Shane Barber of Barber Financial Group is a Registered Representative and Investment Advisor Representative for NPC. Shane serves as a Wealth Manager and Vice President of Marketing at Barber Financial Group. His focus is on the financial and economic education of his clients as he strives to ensure that they are able to grow, keep and leave their money in the most tax efficient manner possible, while accomplishing their life goals.
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