<p>There is nothing like the meltdown of an economy to get people curious about how the economy actually works. Subprime, CDOs, leverage indexes, mortgage insurance: you'd have been laughed out of any decent bar a year ago for talking about these things. On the one hand, anything that inspires curiosity can't be all bad, but when speculation and fear rises faster than education does, the real trouble begins. And right now, with all of the uncertainty swirling around, it's easy to feel more fear than confidence in what's going to happen next. But do small business owners have special reason to fear? Let's break it down.<br></p><p>1. <b>Meltdown, shmeltdown: Look local</b>. I spent most of today doing a quick tour of local shops and small businesses. Sure, totally unscientific, but a handful of real observations can do wonders piles of numbers can't. Here in Seattle, despite the tragic demise of <a href="http://en.wikipedia.org/wiki/Washington_Mutual">Washington Mutual</a>, people are going about business as usual. The local Target was packed on Sunday, with people buying all sorts of non-essential goods (are Wii's and capachino machines essential? I think not). Keep your eyes open to what people are doing on the street. High priced convenience goods are easy indicators of consumer confidence, and if you're a small business owner, don't worry exclusively about the nation. Instead pay the most attention to where your customers live: every city, and industry, has its own economic currents that may run against the nation at large.<br><br>2. <b>Fundamentals, fundamentals, fundamentals</b>. My father, a career businessman and entrepreneur, always told me the fundamentals of commerce never change. If you can sell goods at a price higher than your total expenses, you will always be ok, no matter how big or small your business. The question then for small business owners is: how strong was your business plan to begin with? Take a fresh look at your monthly expenses and income. Are you meeting your projections? How much of a hit in income could you manage? And for how long? Know these numbers. If things do get worse, your solid knowledge of your business fundamentals (not projections, but realities) will be key to finding your way through tough times. Build a contigency plan <b>now</b> for what to do when income drops, even below expenses. How would you change your marketing? What rate changes would you consider? Imagine a future where things are worse, and come up with a list of tactics today. Then, should the worst happen, you'll have a first-aid kit to start from. If you're doing well, take advantage: can you refinance your debt? If you have strong credit, many banks are looking for you.<br><br>3. <b>Think of staple goods and services</b>. Some businesses do better in uncertain times. Insurance brokers, therapists, bartenders and drug dealers (hey, I'm being honest here) all likely do well when the nation is doing worse. The number of people seeking these services increases when the general economy isn't doing so well, and you might have a service that fits the bill. And then, of course, you have the staples of life that people need to spend money on no matter how much of it they have. Things like food, water, shelter, and medicine. Consider office supplies, copy machines, printer toner, and other essentials to every business: no matter how well the economy is doing, people will always need these things. Review your offerings: which goods and services are the staples for your clients? Consider focusing your business on these activities. Cut offerings that have low margins, high overhead and low purchase rates, and optimize your operation for the goods people will always need from you. <br><br>4. <b>Discount future sales</b>. If you want insurance over the next few months you can buy it, cheap. Offer your best clients a special deal for future repeat business. For example: say you're a hair stylist. Instead of charging $40 per haircut, offer a deal that only charges $25 if they sign up now for a haircut every month for next year. Another way to do it is to make every 4th haircut free (like those cards coffeeshops use). There are dozens of ways to do it, but make it easy for customers to feel committed to you in the future. Yes, you're giving up profits for security, but it's a great trade in rocky times. <br></p><p>5. <b>The game is on</b>. The free market is not a fair place. It's easier to run a business when spending and and credit are on the rise, but when things slow and times are tough, the strongest businesses reveal themselves. If you have skills critical to your clients, are smart in your marketing, and have strong relationships with your clients, you should do fine. However, if you are slowly realizing the sizable advantages of your competitors, and the fundamental assumptions you've made that aren't panning out, it's time to make big moves, or move on. And don't forget: opportunities often surface during an economic crisis. Good businesses that were run poorly (or into the ground), or good people fired by failed companies, could be your next brilliant acquisition. <br><br>6. <b>Use your network</b>. When times change, insight is key. The wider your perspective on what's going on, the better the odds you'll anticpate what's coming (and handle it better than your competitors). Poll your biggest customers: what do they see in their next 3, 6 and 12 months? They won't tell you they're in trouble unless you ask (and even then maybe not). On the upside, there might just be a partnership that makes sense now that never made finacial sense before. You'll never find new opportunities if you don't chat openly with your network of clients, partners and peers. There is no better time to grow your network than right now, in uncertain times, when everyone is listening and re-thinking. If you wait until things are dire before you tap your network, you'll be an unlikely candidate for parternship, as the wise can spot a sinking ship miles away. Use Biznik and get out there and stay ahead.<br><br><br></p> 2008-09-29T23:42:07Z 2008-09-30T04:06:32Z -16.3852 2740 1777 true 11 249 how-the-financial-crisis-affects-small-business 26 2008-09-30T04:06:20Z 2008-09-30T04:06:20Z

There is nothing like the meltdown of an economy to get people curious about how the economy actually works. But do small business owners have special reason to fear? Let's break it down.

1 2009-02-24T09:46:13Z