Best Practices for This Tough Economy
December 31, 2008
What can you do to improve your company’s situation during this challenging economic period? Many business owners are employing creativity and sacrifice to weather this storm while sales are slow. Here are some ideas that I’ve heard about and liked; you may find them helpful for your situation.
While many large companies are laying off staff, you should retain everyone you can so that you’ll be positioned to handle business when things turn around. You can probably find ways to keep your valued employees if you apply some creativity.
For example, everyone can sacrifice a little so that no one needs to lose his or her job. The management team of one company got together to find a way to make cuts so that no manager would be terminated; they decided to pay for their own health coverage and T&E costs (something the company had been paying) and this was enough of a dent in the budget to keep everyone employed.
When your bank says no or your home equity line is cut to the bone, you can still find money if you know where to look.
- Talk to vendors and suppliers—they want your business and may be willing to provide you with favorable financing terms so you can continue your purchases from them.
- Explore angel investors—well-heeled individuals who are willing to take a flyer on an unknown business. Their lending standards may not be as strict as commercial lenders today, but they still want to see sound business plans and solid financials before investing. This type of funding reportedly is down 11% in December 2008 compared to the previous year, but is still a viable funding alternative. Find more about angel investors from the Angel Capital Association.
- Use peer-to-peer (P2P) lending—usually personal loans you can secure from family and friends or through social networking sites; you then use the proceeds in your business. Examples: LendingClub; Prosper; VirginMoney. Note: There has been some concern about this type of arrangement (one company, Zopa, has stopped arranging loans), so use caution.
Offset slow sales by budget cuts
If revenue has fallen off, you can maintain your company by reducing your overhead. Now’s the time to re-negotiate everything you can—from your lease, to telephone service, and other expenses. No expenditure is too small to review and trim (e.g., reading the news and information online for free and eliminating newspaper/magazine subscriptions).
Companies experiencing severe financial pressures may be thinking about drastic measures, such as bankruptcy. There is another choice—restructure your outstanding debt so you can continue in business while things improve. Corporate Turnaround
, for example, can help a business negotiate with its creditors to spread out payments or reduce outstanding debt and avoid bankruptcy. While this isn’t a solution for every company, it’s something to be explored before deciding to go out of business.
Winning business ideas
has completed a contest, “What Works for Business,
“ to celebrate the best business practices in 10 categories. The winners are named on January 12, 2009.