Small Business Lending Blog

When small business owners start talking about recessions and the economy, the topic usually orbits around things like consumer spending and down sales.  Unfortunately, a recession can affect you in more ways than you realize.  To avoid the crippling effects of the recession and economic roller coaster, keep these tips in mind and steel yourself for the lean times to come.

Cut Costs

Cost cutting in your business, if done wisely, is always a smart move, but don’t do it in a way that can harm you.  One of the most common mistakes managers and small business owners make is cutting labor.  You need to maintain your staff and cut other costs in your business.  If sales pick up, and you don’t have the staff to cover it, service suffers and you could lose those new customers/clients.  Consider doing things to reduce shipping costs, maintenance, utilities general expenses, etc.

Open Lines of Credit

For a business owner, having a business credit line can provide the extra cushion you need to get through a lean period, whether it’s a few weeks or a few months.  Ideally, you want to set up those business lines of credit “before” you need them.  In today’s credit & lending environment approvals can be hard to come by from banks but knowing the right lender, working with the right person, and understanding how to properly prepare your credit file can greatly improve your chances of success.  Do your homework so you choose the best option for your business (unsecured business credit line, business credit cards, small business loans, etc.)

Improve Customer Service

You should rethink your customer service strategy to truly make your customers feel welcome. Let them know how you appreciate their business, provide incentives for returning customers, referrals and more.  This is not a time when you want to give them a reason to locate a competitor in hopes of better service.  Make sure you bring your “A Game” every day.

Special offers and promotions not only make people appreciate your offering, but during lean times they’re likely on the lookout for savings as well.  That gives them one more reason to keep coming back.

Embrace Your Best Employees

If you’ve got people working for you, then chances are good that some are better at handling your business than others.  While you want to treat everyone equally, you also want to take care of the employees who are taking care of you.  Keep them happy, keep their morale up, and they’ll keep your business running.

Turnover your Inventory

Managing a lot of inventory on a regular basis can be tough, but trying to manage large quantities of inventory during a recession can weigh you down and create more expenses than you can handle.  Inventory costs (controlling and counting), theft, spoilage, returns – these all affect your bottom line when cash flow is tight.  Come up with a strategy to rotate your stock faster, learn to run leaner and improve your ordering process.  This is especially important if you’re working with food or other products that could spoil or run in seasons.

Spend on Marketing

You might think spending is a bad idea during a down economy, but the business owner who stops marketing to save money is like the man who stops a clock to save time.  You actually need to get more aggressive with your marketing.  The costs are minimal and with an effective marketing campaign the ROI (return on investment) often covers the costs and then some.

Don’t have the funds to start marketing aggressively?  Talk to a financial counselor about taking out a small business loan.

Recognize Your Employees

Few things are more important than taking care of your employees.  During a recession, everyone is hurting – especially your workers.  Take the time to recognize their efforts and determination, because they could be suffering serious morale issues.  Battling rising expenses can be hard on a limited income, and that’s just one issue they might be dealing with.

Offer incentive programs, bonuses and anything else you can to keep their interests vested in your success.  A smart option to take care of employees is to keep a running business credit line you use for employee rewards.

A recession is going to test you and provide more challenges than you ever expected.  With proper planning, and smart management of your finances, you can find success even in difficult times and come out on top.