No one likes to think about a downturn in business. But if it happens, the sooner you see it coming, the better prepared you will be.
Finances: Prepare monthly financial statements and look for problems before they arrive and wreak havoc.
Expenses: There are only two ways to improve the finances — increase income or decrease expenses. Increasing income takes time, but decreasing expenses can be immediate. Look for specific expenses you can cut if sales slow down.
Customers: Don’t wait until it’s too late to build customer loyalty. Develop a customer-loyalty program that will help see you through hard times.
Employees: Employees are one of your most important assets, and good employees are difficult and expensive to replace. Before you make any staff cuts, be sure customer service and production won’t suffer.
Marketing: It’s tempting to cut marketing costs when things get tight. But if sales are slow, you may need to actually increase marketing instead of cutting back.
Inventory: While you need product to make sales, don’t let excess inventory create cash-flow problems.
Cash reserves: Banks aren’t interested in lending money when you’re experiencing difficulty, so make arrangements during the good times to protect yourself with a line of credit.
Credit policies: If you extend credit to customers, make sure you have a sound policy and follow it. Don’t let customer credit become bad debt that burdens your finances.
Gene Fairbrother ShopTalk 800® Business Consultant National Association for the Self-Employed Dallas