Finance & Enjoyment Blog

Small business is a major driver of the U.S. economy.  In hard times, however, smaller businesses have a tough time surviving.  What should they be doing to survive and thrive?

Manage Payroll - Payroll is typically one of the largest costs in a small business.  The challenge is to employ just the right number of people to provide optimum customer service.  This means projecting sales and staffing to meet that need.  The successful business will master the art of maintaining high quality service levels, without employing excess personnel that consume the businesses potential profit margin.  One approach is to shift middle management people from salary to hourly and managing their time.  Another is to pay more bonuses while not increasing base salaries and wages.  Maintaining a list of qualified people that have applied for work, or that you have laid off may assist you with swiftly and effectively responding to sudden growth.

Advertise - There is an old adage that says, in essence, in good times you should advertise.  In bad times you must advertise.  This is so true!  Many weaker, under capitalized companies will fall away in a downturn.  This time can be an opportunity to expand market share.  But you must get the word out!  Increasing sales can be the answer to keeping any business out of danger.

Search for Good People - Layoffs can cause good people to be unemployed.  In an "employers market" there is opportunity to let sub-par workers go and replace them with better people.

Monitor All of your Expenses - This is an exercise you should be doing all the time, but it is even more critical in a downturn.  Start with the ten largest expenses listed on the income statement, and study them to see if you can reduce any of them without damaging customer service.  But don't ignore the smaller expenses.  Every dollar saved goes to the bottom line.

Manage your Taxes - Working with a good tax adviser can help you plan effectively for income, payroll, property and other taxes.  There are many techniques available for tax reduction.  People tend to focus primarily on income taxes but all the other taxes should be assessed for potential reductions.

Manage Debt More Carefully - Cash flow and wise use of debt is usually a required part of running a business, whether it is for capital expansion, maintaining inventories, or a host of other legitimate reasons.  Increasing debt is tempting with the current low interest rates, and in a low interest market restructuring your debt structure may save money.  Reducing debt and building cash reserves could also be the winning strategy.  Strategy depends on the unique financial situation of the business, and this can also be a delicate balancing act.

These concepts are only a smattering of key points for small businesses.  An economic downturn can be an opportunity if you plan well, and implement good strategies.

Posted in Successful Practice Management »

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