What does the financial crisis mean to small business?

Small business owners ask me “should I be worried for my business?”. The fact is that as a result of the news of the past few weeks, and in particular yesterday, we all have reason for financial concern, as we see markets drop and inter-bank credit tightening.

Now, more than ever, a small business owner needs to “work on the business”, evaluating strategy and monitoring sales, cash flow, productivity, costs, and profitability. With 300 million consumers in the United States, the majority of whom are working, there remains a high demand of every type of product and service. So, business owners need to examine their strategies to ascertain that they are offering viable products and services and selling them at a fair price. Strategy adjustments need to be made as needed to really be competitive.

This is a time to do necessary belt-tightening by eliminating marginally profitable products, helping employees improve productivity, and cutting non-productive employees. Cash flow should be monitored daily with initiatives to improve collections, and negotiate longer payment terms with suppliers.

The major challenge that small businesses have been experiencing in recent months, and which will only get worse in the short term, is availability of credit from banks. This may mean that expansions will need to wait, and perhaps even large orders will have to be turned away. There will also be customers who will not be able to purchase due to their inability to borrow. However, business owners who need cash should be tenacious – some banks are better capitalized than others and consequently willingness to lend money varies by financial institution. There are also alternative funding sources that are still working with small businesses.

The main advice I can give is to stay the course. Be honest about your market and demand for your products and services. Provide excellent customer service. Keep an eye on cash.

Will Limkemann
Limkemann Business Advisors
440-871-0976
www.neobizadvisor.com