I have operated my own business now for just about 33 years. This is my third recession and although I do not claim to be any kind of business expert I have survived and have learned from my mistakes (there have been countless). I felt I should certainly write this article to maybe give some insight to other small business enterprise people to help them steer clear of some of the mistakes I have made and to supply some hope and encouragement at a time when the whole world may appear to be against you. Some essential points I want to emphasize.
1. An economic downturn is not your fault. Some of the greatest small business men and women in the globe can not survive in tough economic times. So do not blame yourself. Do not let hindsight torture you. By this I mean by thinking the if only. If only I hadn't expanded, if only I hadn't hired much more people today, if only I hadn't bought this or that and so on. Recessions are especially seldom foreseen and nobody has a crystal ball. You are where you are at and it is what you do from here on that will ascertain your survival.
2. The team you have surrounded your self with can move really speedily from becoming valuable and supportive to becoming a direct cause of your inability to survive. This consists of your lawyer, accountant, banker, insurance agent and employees. Why do I say this? Your lawyer is concerned with doing what is lawful not moral. You are concerned with surviving. Your accountant is extra concerned about correct tax returns. In a recession the tax man can wait. Your banker is an employee much more concerned about his job than your business enterprise survival. Your Insurance agent is a great deal more concerned about the company he/she represents and collecting the premium you owe than your company survival. Your employees are concerned about their jobs and pay cheques and you can be positive your competitors have already approached your ideal and you know you cannot depend on your worst.
three. Accept the truth you are on your own. Anticipate sympathy from no one. Complain to no one. Cut all unnecessary expense and overhead. Analyze your labour and choose at what point you will have to give consideration to decreasing your labour expenses and who will be laid off 1st.Then start off lowering your dependence on those individuals in an effort to be prepared for the worst case scenario.
four. If you are working with a line of credit (short term credit) replace it with lengthy term credit that cannot be known as and access extra credit to have out there if needed. If long term financing is not an alternative do not depend on one lender. Open up a second operating account and when probable deposit some revenue to construct up some cash must your existing lender shut you off. (take away your line of credit) If your lender calls your loan in no way continue to deposit funds in that bank. Any money deposited will be applied to your operating loan and cheques will be sent back NSF. Managing your money flow will be critical and switching banks will mean all automatic withdrawals (payments) will not be honoured. That is okay. Contact them and advise you have switched banks and will send them a cheque. It is important to defend your credit score and there are some items you really should know here about managing your money flow and protecting your credit. As smaller business folks most of our credit is individual or consumer credit. As of this article (in Canada) Business enterprise loans and mortgages do not show on a credit check. Just personal credit (credit cards, vehicle loans, utilities and so on.) In a recession managing your money flow means no automatic withdrawals and you pay those bills very first that protects your credit score. A wise business person when said to me." The quantity one rule in business is never let anybody else invest your money. If you have a book keeper implement a policy where by all checks have to be cleared by you and all purchases have to be accompanied by a purchase order.
This is just the tip of the iceberg in recession proofing your enterprise and covers the standard minimum requirements to survival based on my years in organization. Last but not least are receivables. Move right away towards a no credit policy a recession is not a time to be carrying receivables.
There is a lot even more I could write about protecting your assets and renegotiating your loans but that is a further article. I apologise if I've offended any of the specialists mentioned but tough times call for tough statements based on my own expertise. That does not mean I do not respect and appreciate a large number of of the experts who have helped me over the years.
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