Yes, the recession has taken its toll on most small businesses — but not everything about the economic downturn is bad. In fact, some smart companies are turning the tough times into an advantage — making changes that can help them not only to survive the recession, but to create a stronger business for when the economy improves, as well.
What’s more: “Time is running out,” says Ken Gaebler, who heads Gaebler Ventures, a Chicago-based small business consulting firm. “Businesses that haven’t made the most of the recession need to do so, before the opportunity is lost.”
How to do that? Try these four steps.
1. Renegotiate supplier agreements. By evaluating your vendor contracts, you’ll probably be able to find areas where you can cut costs or ask for better arrangements—for example, requesting a lower price or payment in 45 rather than 30 days, in exchange for locking in a longer-term agreement. Gaebler points to a small business that renegotiated an $8,000- a- month retainer with a public relations firm to $2,500—with only a small reduction in services offered.
Remember: Your renegotiation should also include your office space. With vacancies on the rise, many landlords are willing to review everything from monthly rent to the length of your agreement and the option to move into a bigger space at cheaper rates.
For best results, suggests Gaebler, you need a systematic approach, contacting all your vendors for potential concessions. In fact, you may assign an employee to the task, perhaps promising a bonus equivalent to 5 percent of the savings he or she creates.
2. Revamp your business processes. “When times are good, you sometimes get sloppy,” says Gaebler. But during a recession, you have to run leaner and meaner. By doing so, you can create new, streamlined systems likely to outlast the downturn.
That means scrutinizing your business processes—anything from your methods for prospecting new clients to how you order parts—and replacing them with more efficient alternatives. Your analysis might lead you to conclude, for example, that operating a booth at an industry trade show isn’t worth the money. Or you might institute new checkpoints for projects to avoid late deliveries.
3. Learn to hire different types of employees. One example: retirees with useful business skills and experience who are willing to work for you for less — and who may want to stay around when the economy improves.
Or experiment with hiring independent contractors as a way of reducing your employer payroll tax and benefit costs. Unpaid internships for recent college graduates can also be an effective way to lowering your head count expenses. “These internships can be a great way to screen for new employees when you’re able to hire,” says Gaebler.
4. Help employees tap their creativity. While tough times can be demoralizing, they can also be a catalyst for bringing out the best in your staffers. In an up market, employees sometimes don’t see a reason to pitch in by focusing on ways to boost revenues or cut expenses. But, says Gaebler, owners who make it clear that everyone must contribute to help ward off further cutbacks, “will get people to tap into talents you may not have known they had.”
He points to the owner of one professional services firm, who was usually the main source of new business. But, with sales down, she recently held a meeting for employees asking that they think of how they could help bring in more accounts. Much to her surprise, two weeks later, a junior employee found a new client through personal connections. “You never know what people can come up with if you give them the chance,” says Gaebler.