07.14.08 Entrepreneurs and Recession
www.ISBO.biz
Quote of the Month:
“When you get to the end of your rope, tie a knot and hang on.”
— Franklin D. Roosevelt, 32nd American President (1882-1945)
Shawn Rogers is the assistant director of the Kentucky Small Business Development Center. She has degrees in accounting and management from the University of Kentucky and worked at a small manufacturing company and her family’s furniture business before joining the KSBDC in 2002.
The SBDC is part of the Small Business Administration and helps businesses in several ways, including feasibility analysis, cash flow analysis and financial projections, market planning and research, and business plan assistance The consulting available at the SBDC is confidential and no-cost. “We are the arms and legs of the SBA,” said Shawn. “We’re respectful of the tax dollars you spend with us.”
The KSBDC offers classroom training—workshops and seminars—for a nominal fee at centers across the state. There is no cost for the online training and it’s available for anyone in the world.
“We work on every phase of business development,” said Shawn. She presented six mistakes people make in a recession, but instead of phrasing it as “don’t do this” she put a positive “do this” spin on each one. “It’s not magic, but when we’re busy and things are going great we don’t think about these things,” she said.
1. Monitor cash flow and debt service. Pay attention to it. Developing a cash flow budget is a good way to take control over what’s happening. Looking at expenses and coming up with a plan will give you a sense of control. “Stay on top of your receivables and don’t let them age,” said Shawn. “Call those people and collect your money. You need that cash flow.” If you’re on the other side of the checkbook, the one having trouble paying an invoice or bill, address problems as they arrive. “If you’re getting behind on something, keep the lines of communication open on loans or vendor payments,” said Shawn. “They don’t succeed until you succeed.”
2. Develop contingency plans. “Hope for the best but plan for the worst,” is Shawn’s motto. Look at your business and how it operates on day-to-day basis. What are the key issues? For example, is it suppliers that keep you in product or your ability to extend credit to other vendors? You might need another supplier or a different distribution pattern. “Explore alternatives available to you,” said Shawn. If the economy is causing your business to slow down, what is unique with your product or service that you could package differently? A client may have been able to afford $125 before, but now $75 is their budget. Can you tweak that ‘package deal’ somehow? “See what products require the least working capital and focus your attention there,” said Shawn. “Those high gross margin products will help drive cash flow.”
3. Keep your name out there. It’s a common mistake that the more mature our business gets the more comfortable we are with clients. “It’s important to stay in contact with customers,” said Shawn. The first reaction of most businesses is to slash advertising. “Is this really a wise decision?” asked Shawn. “You need to keep your name out there.” You may have to go viral or guerilla or get out there and network, but promoting your business is vital. Blog, share your expert knowledge with others. Be a guest speaker. Send an electronic newsletter.
4. Pay attention. What are your customers telling you by their spending habits? “Meet the needs of your customer or the changing needs of the market,” said Shawn. Belonging to a trade association is a good thing, because it keeps you plugged in to what’s going on in your industry. Industry publications are another good way to see what’s current. Before she joined the SBDC, Shawn was involved with her family’s furniture business that specialized in antique reproductions. She paid attention to a shift in the customer base when people were turning away from traditional reproductions. Shawn studied up on trends and helped her family come up with Shaker and mission-style lines, among others. “Get some feedback from your customers,” she said. It could be as simple as an index card asking for suggestions. “The more you understand what they’re thinking, the more you can address their needs,” she said. “Sometimes we’re so busy we forget to take the time to pay attention to details.”
5. Focus on basics. When things get tight in economy, our clients look for more value. “You have to communicate more value to customers,” said Shawn. “How can you position your offerings and reinforce to your clients the value they receive in working with you?” Look for opportunities for improvement. Get feedback from customers. Focus on what you can improve.
6. Be introspective. “Failure to do so can lead to a drop-off in business,” said Shawn. “To survive or grow I must evolve; I can’t stay the same way I am right now.” To grow your business, you have to ask yourself some heavy-hitting questions: What are customers complaining about? What do they like about my business? Where are they telling me I have opportunities for improvement? What is their perception of my business? “Unless you can recognize that improvement is needed in an area, it’s almost impossible to change,” said Shawn. “This introspection could open the door to growth.”
It’s not magic in a bottle, but these points are things to consider. When the economy is slowing down, look at the six issues Shawn talked about. It’s not meant to be depressing, but empowering. “It is empowering because you have tools,” said Shawn.
We are not alone. Microenterprises, those with five or fewer employees and usually requiring $35,000 or less in initial capital, make up 87 percent of all U.S. businesses. A small business is defined as 500 or fewer employees, according to the SBA. Small businesses employ half of all private sector employees in the country. “Your business is important to the economy,” said Shawn. “Yes, we’re in uncertain times but there are people who want you to succeed and the SBDC is one of those groups.”
We thank Shawn for her presentation.
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RECOMMENDED READING:
Mastering the Rockefeller Habits
by Verne Harnish
Small Giants
By Bo Burlingham
The Starfish and the Spider
by Ori Brafman and Rod Beckstrom
Steering by Starlight
by Martha Beck
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Have a fabulous month!
KS
Kathie Stamps Contact me
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Charlotte Caldwell Contact me
ISBO.biz Web design and technology
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This is a recap of the July 2008 ISBO.biz luncheon in Lexington, KY.
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