They don’t call 2008 “The Year of the Rat” for nothing. Although some small businesses will emerge from 2008 relatively unscathed by the financial turmoil, it is likely that most will be affected negatively as we move ahead into a recessionary economy and the perils of uncertainty in the global economy. This period is likely to last at least 1-2 more years and could go longer.
Although new and great challenges are always coupled with new opportunities, my feeling is that the best small business strategy moving ahead is to cut your expenses as much as possible, assume the recession could last for several years and seek stability more than growth unless you can grow the business very inexpensively. Rather than borrowing to grow, consider options where you can effectively monetize your own time and experience towards the longer term goals rather than take on more business development expenses (and thus usually more debt) as one tends to do in a normal business environment.
Following are a few examples:
How about writing the business blog you’ve been putting off?
Consider setting aside a few hours a week to write that business-related blog you’ve been putting off for the past few years. Even the most mundane products or services will benefit from greater online exposure, and given the current online environment there are few - perhaps no - better ways to cheaply promote your business online than with a timely and relevant blog featuring your own business expertise, ideas and recommendations.
Rather than hire a consultant, just roll up your sleeves, head on over to Wordpress.com or Blogger.com and pull together a simple blog for your small business. Write what you know and you’ll often find you had more to say than you realized. Although ideally you’ll write often in your business blog, simply having one is a significant enhancement to a website presence, and the blog and site do not even need to be integrated to be very effective as promotional tools.
Review your expenses. Cut some fat and review them again.
Successful businesses often “strategically” overlook some waste, especially when the “nickels and dimes” simply don’t seem worth hassling when there is big money to be made with alternative activity. However, this can lead to wasteful spending creeping into your business even during lean years and even if you’ve kept the budget pencil sharp it is likely you can find cost savings in places you may have thought were simply “untouchable”. I recently inventoried my phone budget and was surprised by how easy it has been to find hundreds in savings with improved services simply by paying more attention. Some lessons from that have been:
Mobile Phone and Data: By renewing a 2 year plan I got a substantial rebate from Sprint as well as very inexpensive phone upgrades.
Land Line: Bundling my land line with cable internet and TV will save me about $300 in 2009.
Toll Free line: Changing to an online 800 line carrier should save me over $100 per year over my current “business class” carrier.
This simple inventory of my “real” phone needs that I’d been putting off for some time led me to savings well over $500 with an actual increase in the overall quality of my services.
Hey, what about the opportunities you were talking about?
The great thing about running a business cost effectively is that you can focus more attention on being flexible and looking for new approaches and new opportunities. Also, having more cash on hand, low or no debt, and a generous line of credit means that you can seize those new opportunities when they present themselves.
Until the real estate meltdown of 2007, I was making more money passively from real estate appreciation than actively from my business. Although I think the real estate market will remain soft for at least another year, I think there will be an increasing number of simply spectacular residential real estate investments as the market stabilizes and returns to the modest levels of home appreciation we have seen in this country since the great depression. This historical appreciation ended with the current real estate and financial crisis. For those with cash or good credit 2009 (though I think more likely 2010) will bring some fantastic investment opportunities.
Business, much like the Chinese concept of years, is mostly a cyclical and not a linear state of affairs. We saw many unprecedented real estate and business valuations in 2006 and 2007 and in some ways we are now paying the price for those highs in terms of the current lows.
The small business owner should now seek stability and efficiency while preparing to take advantage of the flexible and nimble nature of small businesses to seize new opportunities, many of which will be spawned in the fires of the current financial crisis.
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December 31, 2008