Experts predict the economy will remain in the tank through 2009, and maybe even in 2010. But small business owners can take this opportunity to lay the groundwork for when things do start to pick up.
Be the first to get out of the starting gates with these 10 steps:
1. Assess Your Business
Examine your company's core mission and capabilities so you can draft a plan. Strategic business consultant Lea Strickland recommends plotting out several different scenarios for when the lights go back on. Which people will you need to put back in place? What offices will need you need to scale back up? "They have to think it all through, what they are saying and doing to make it work," says Strickland. "They have to do it logically and incrementally."
John Combs, chair and CEO of communications solutions company ShoreTel (SHOR) ( SHOR), agrees, adding, "Be wary of silver bullets -- things that look easy to do and are outside of what you've been successful at. That means reengineering yourself in this time. In a difficult economy, you're going to have to watch resources to keep your company."
2. Be Strategic
During this assessment, keep in mind what you can't do so as not to cut into your ability to compete. That means considering upgrading your Web site, training to retain employees and investing in new technology. If you can afford it, hire, since a lot of top talent is now available.
It may also mean taking a closer look at your customers. Many consumers don't have a lot of discretionary income these days. Look at where they're spending money and see if your business can meet those needs, says Marvin Davis, author of Take No Prisoners: A No-Holds-Barred Approach to Corporate Excellence. Figure out how you can entice them to come in or hire you.
3. Be Contrarian
The biggest mistake is to cut prices, says Davis. "You launch yourself into a death spiral," he says. "You may be selling more but your profitability goes away." Instead, see if your product or service serves a particular niche. If so, you may actually be able to increase prices.
4. Resist Bargains
Vendors are hungry for business so they're slashing prices. But don't be seduced by the bargains and throw money away on equipment and supplies you really don't need. "It's not a good deal if it doesn't help with your core capabilities," says Strickland, who is also president and CEO of FOCUS Resources.
5. Start Negotiating
Position yourself for a brighter future by cutting expenses. That means negotiating with vendors and bankers about terms, pricing and schedules. They're just as eager not to lose your business as you are not to go out of business.
Another way to cut costs and strengthen your position is to form alliances and collaborative agreements with other businesses. David Zahn of Zahn Consulting, says you should even consider sharing workspace. "This allows for better synergies to evolve and emerge for when opportunities arise."
7. Be Smart About Staffing
Keep employees you consider integral to the business. It takes money and time to train someone and bring him up to speed on all the company's practices and procedures so don't let go of anyone you'll need as soon as business picks up. Meanwhile, hire temps. Also collect resumes of people you think can help you to ramp up quickly, recommends Zahn.
8. Build Up Cash
Whoever ends up with the most cash at the end of the day has a fighting chance at being around for the 22nd century. You need cash to buy needed equipment, make payroll and expand. And now that banks are less than eager to issue loans and lines of credit, cash has become even more important.
9. Convert What You Can to Cash
That means unloading that warehouse you never use. Putting a For-Sale sign on that piece of machinery that's gathering dust. Use eBay (EBAY), used equipment buyers, Craigslist and overseas buyers. "Remember, cash is king," says Davis.
10. Reach Out and Connect
Continue to build up your network. Volunteer for events. Sign up to be on your industry's association committees and boards. These relationships come in handy whether times are rough or rosy.