Small business may be in for a rough ride ahead, thanks to lots of insomnia-inducing financial news. Moody’s Analytics just lowered the U.S. economic outlook through 2012, with chief economist Mark Zandi saying that the odds of a recession— already one in three—will rise if stock prices continue to drop.
That doesn’t mean it’s impossible to grow your company now. Even if you did a lot of budget trimming during the Great Recession, finding more ways to keep your overhead down can liberate some of the cash you need to reinvest in your business. At the very least, keeping a close eye on your spending will help you build a financial cushion in case a slow economy causes customers to start paying you late.
Here are three ideas you may not have considered recently.
1. Switch to a bank loan if you can
Credit card financing can be useful for short term purchases. However, if you’re using it in lieu of a bank loan, you may be adding to your overhead unnecessarily.
The National Small Business Association’s Mid Year Economic Report found that small business owners in established businesses are paying higher interest rates on credit card financing than six months ago. The number of entrepreneurs paying an interest rate that is 20 percent or higher jumped from 13 to 19 percent over the past six months. The good news: The number of small business owners using bank loans rose a bit, from 45 to 49 percent.
If you haven’t approached your banker lately because you thought there wasn’t any shot of getting a loan, maybe it’s time to schedule a sit-down.
2. Make your overhead more flexible
Look at the fixed costs on your balance sheet and try to turn them into variable costs, whenever possible, advises John Torrens, an assistant professor of entrepreneurial practice at Syracuse University and owner of a company that provides early-childhood special education services. Just as in your household budget, bringing some flexibility to your monthly financial commitments can give you room to adjust to a fast-changing economy.
For instance, at one point Torrens moved some of the well-established therapists on his staff from salaried positions to fee-for-service roles, where they got paid based on how much they worked.
“People didn’t mind being paid a fee for service,” he says. “They had more motivation to work more.”
For newer members of his team, he stuck with a salaried model, so they had time to build up a steady client base before moving to the fee-for-service model. Worth noting: Workers who switched to the fee-for-service plan did not lose benefits at his firm—benefits were still available to those who worked a minimum of 30 hours a week.
3. Choose projects that will help your marketing efforts
You can reduce what you spend on your promotional efforts if you focus on winning jobs that can help you pull in more customers. If your business is young, taking on an assignment from a big-name client that you can mention on your website’s customer list or on your LinkedIn profile can go a long way toward bringing in new business—without any added spending on your part. That’s a factor worth considering, even if the job itself is not the most profitable one available to you at the moment.
If business is slow, consider doing volunteer work that will help you raise the profile of your company. You never know what potential clients you’ll meet at a charitable event that’s popular among business professionals in your area, whether it’s a golf fundraiser or the science fair at the local public school. And once again, you won’t have to spend any money on this type of informal self-marketing—reducing the need to buy costly advertising.