Thomas E. Houck is a speaker, author and consultant whose program, “Your CFO Advantage” helps business owners grow their companies. reduce their taxes and lower their stress level.
Here are his top 10 survival tactics to help small business owners in a tough economy:
1. Cash flow is king—As a small business owner, you must know how your cash flows. This isn’t fancy accounting; it’s simply tracking how cash
comes in versus how it goes out. Take two hours, and use your QuickBooks or check register to get a grasp of this monetary movement.
2. Trim the fat—When cash flow is good, “fat” tends to accumulate. Now is the time to look at where your money is going and eliminate unnecessary items. This includes the business Hummer, that expensive copier lease and the T1 connection instead of basic cable modem. You may need to make some tough decisions about eliminating employees. It’s critical that you get your cash outflows to a manageable level ASAP.
3. Look into the future—When clients and projects are rolling, most entrepreneurs believed new business can materialize whenever things temporarily slowed down. Those times are gone. During the next three months, analyze what money is coming in; specifically from where and when.
Compare this to the new cash outflows you assessed in the step above. If things are tight, that’s fine. But, if more is going out than coming in, trim more and find additional income. Do this exercise each month, always looking at least three months out.
4. Get back to basics—When you first went into business, you may have had to fight and claw to make ends meet. Make a list of the things you did back then to bring in revenue. You probably moved away from many of those strategies when business improved. This is the time to aggressively return to them.
5. Avoid the evil temptation—It’s tempting to use debt and credit cards to borrow your way through slow times. Since no one knows how long this slump will last, borrowing may result in the demise of your business. Say “NO” to using credit cards, the equity in your home or any other borrowing. Resolve that you’re going to scratch and claw your way through this using the cash flows of the business. You’ll come out stronger in the end.
6. Keep emergency cash reserves—If you have any money right now, create an emergency fund that equals one, two or three months of your cash outflows. Put this in an account, and don’t use it unless it’s life or death for the business. This provides a cushion just in case something bad comes along at the worst possible time. If you don’t have cash now, do everything you can to build up such a reserve.
7. Bank on it—Your banker is probably as scared as you are. If you’re having trouble keeping up with your obligations, steer clear of the banker until you can show a concrete plan for getting cash flows back in shape. Use the steps above to create the basics for the plan, and ask your CPA to help you format it. Once it’s complete, communicate with your banker clearly, and ask for help implementing the plan. If it’s a quality financial institution, they’ll want to see you make it, and help you any way they can.
8. Don’t forget the customers paying your bills right now—Although you want new business, it’s imperative you keep your existing ones. Your competition is desperate, and they may try anything to get your customers. Call your clients yourself, ask them how they’re doing, and if there’s anything you can do to help them out. Ask if they’re happy with your service and how it can be even better going forward.
9. Get to work on the important issues—The business owners who survive will be the ones who do the things above ASAP and get their ships righted. You must make time to work on your cash flows and improve the customers experience NOW. Set aside a full day within the next week to work on the items above, without interruptions and excuses. You might even consider a Sunday, when things are quiet.
10. You must think clearly—When you’re stressed, it’s nearly impossible to make big decisions and show the leadership needed to survive. Some suggestions to lower stress levels include relaxation CDs, exercise and outdoor activities with family. Anything that gets your mind off things and helps you relax is good.
Entrepreneurs have a sink-or-swim, do-or-die mentality. Focus on the right things, and you’ll get through this.
By Thomas Houck
For more information visit www.heritagebusinesssolutions.com.
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