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Home Tips > Tips By Category > Tips you can implement daily If a recession does take hold, small- to mid-sized companies will be among the hardest hit. Lacking the resources of bigger players in their industries, they are usually the first to get called in by skittish banks and suppliers during a credit crunch. Yet there are many steps smaller businesses can take now to hedge against a sustained downturn. Here's what some experienced business owners and consultants say they've learned to do to prepare for a slowdown in business activity.
Secure your lending relationships
Securing relationships with bankers ranks at the top of "to-do" list for small businesses. "If you're having trouble ... look for other sources."
Improve your supply chain
Scout out the best prices on materials and equipment. "Shake up your vendors and look around," says Cloutier. "Now is the time to make your vendors a little more competitive with you." Know the rock bottom prices for equipment and shop around for the deals. Auctions are a great source of everything from office furniture to new vehicles.
Motivate your employees
Shift your employees, especially the sales force, to pay-for-performance incentives, says Cloutier. If you're a manufacturer, reward the staff, regardless of level, if they figure out ways to make a better product for less money or reduce waste.
"Share your profits with your employees, right down to the guy who machines the tools or the fender," Cloutier says. And for the underperformers, he has a simple but direct approach: "Get rid of them."
Clean up your financials
Do not wait for the credit crunch to hit before cleaning up your financial statements, make them as transparent as possible.
Many small businesses are unfamiliar with the process of producing good financials because credit has been easily available to them. "They never had to present good, strong financial statements and different plans and to build a case for their finances,"
Get a handle on your cost structure
Now is the time to question how much it really costs to deliver a service or make a specific product, says Landis, who notes that all too often companies are well versed in their pricing structure but not clear on which products are most profitable. Sometimes, she says, lower-margin products are the winners in a downturn if there is steadier demand for them.
Take a hard look at customers
Landis recommends reviewing Dun & Bradstreet credit reports for your current customer base to get a heads up on who might be in trouble. She also suggests periodically reviewing the media coverage on key customers to see if there are any red flags. And she advises clients not to get lulled into a false sense of security just because a customer might be publicly traded. "Don't assume because they're a public company, they're never going to go bad," she says.
Husband your cash
Bill Dunkelberg, chief economist for the National Federation of Independent Businesses and a business professor at Temple University, advises small companies to keep their inventories lean. "Don't spend your money, your cash, on things you can't liquidate," Dunkelberg says. Be careful not to be lured by government inducements such as low interest rates or tax credits. "You don't buy capital equipment that you don't need right now," he says. Meet the deadlines on your lending commitments but don't rush to pay early, he adds.
Source: features.us.reuters.com
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