I just read on Bloomberg that the U.S. unemployment rate is going to hit it’s highest since 1994. Another 500,000 people will be laid off, and I have a sneaky suspicion that this is only the beginning. Just about every major industry is suffering—auto, banking, real estate/mortgage and retail, you name it.
It won’t be long until this recession trickles down to hit just about everyone who isn’t a doctor. A close friend of mine who manages a mutual fund and is a financial analyst confided that this recession could take up to six years to fully recover. So, how can you prepare your small business for this economy?
Stay Calm
Your employees, clients and family are depending on you to lead them in a time of potential crisis. Do your best to make decisions methodically, and get the counsel of other professionals who can help you make good judgments. The last thing you want to do is unnecessarily sever relationships with employees or vendors, potentially inflicting unnecessary damage to your company and reputation.
Avoid Debt
This suggestion may be late for many businesses, but for those of you that are considering going into business for yourself, do your best to build your business the right way. Something that our company, Logo Design Guru, has done extremely well is to build a profitable business with no debt.
I’ve seen many companies take massive loans to expedite growth rather than grow organically, only to hit a speed bump and never recover. It’s always easier to get money when you have money. And, since we are profitable, we’ve been able to save for opportunities as well as for rainy days. Get ready for a storm.
Eliminate Waste
Now is a great time to review your vendors. Contracts with vendors such as telephone companies, merchant accounts, payroll services, healthcare services, and office supplies should be renegotiated, or replaced with a less costly vendor. These actions should be done prior to layoffs or cutting marketing expenses.
Be Honest
Let them know the financial status of the company. It is OK to tell your employees that raises are frozen as a result of the economic conditions. You may be surprised at how well your staff rallies behind you in order to save the company, and ultimately, their own jobs.
Develop a Game Plan
Create several financial scenarios for stress tests. Each scenario should have a plan that you can implement in the event you don’t reach your sales or revenue benchmarks. This allows you to remain methodical without getting overly emotional.
Look for Opportunities
Successful businesspeople look for silver linings in the cloud. Your competitors will begin to disappear, thus opening up an opportunity to gain market share. You can forge new relationships with other companies who also are looking for ways to generate new revenue.
Don’t stop marketing. In fact, get creative and aggressive with your marketing. If you survive the rough times, you will come out even stronger when the economy rebounds.
Joe Witte is a partner at Logo Design Guru and a writer for SOHOBLOG , and has successfully started 3 small businesses including CentricSource and Travel Ad Network.
