7 Ways Your Small Business Can Weather a Downturn
By Michael Newsome, co-founder and president of LAB Digital Creative and member of the Greater Memphis Chamber.
As president and co-founder of LAB Digital Creative, a Memphis website design and digital marketing agency, as well as a former banker who helped small businesses weather the recession in 2007-2009, I have experience with assisting businesses stay afloat and even remain profitable during challenging times.
I’ve compiled seven ways for small businesses to weather the challenging times that most likely lie ahead in order to stay open, stay lean and stay profitable.
Maintain your client relationships
Call your clients. Call even the folks you haven’t talked to in years. You’ll need to let them know that you value them and are concerned about them as people as well as their business.
Ensure you have access to credit and conserve cash
Get in touch with your banker and discuss your financial situation in-depth. Bankers value transparency, even if the information they’re receiving isn’t positive. Tell them the good and bad. That will strengthen your valued relationship with them. It’s always good for a small business to have access to a line of credit for emergencies. Be cautious of your unique situation, but potentially take advantage of low interest rates.
In addition, be conservative with your cash flow. Cut where you can and save where possible to ensure you have cash on hand necessary in order to get through the rough patch. Ask yourself, “Do I have unnecessary software or other types of monthly subscriptions/expenses that could be eliminated?” Take time to carefully examine your credit card statement and P&L, line by line.
Talk to your suppliers about stretching terms
As an Apple credit card holder, I received an e-mail saying that I can skip March’s payment with no penalty or interest incurred and make my next payment April 30. And the IRS announced that they are delaying payment of taxes by 90 days. While Apple is a huge conglomerate of a company and the IRS…is the IRS, many of your vendors—both large and small—will likely be willing to work with you in the current economic climate. Stretching the difference between A/R and A/P can help stretch your money much further until things turn around.
Use a scalpel, not an axe with your marketing budget
One of the first line items that can be attractive to cut during a downturn is marketing. While there may be areas where you can save, keep in mind that you have to stay in front of prospects and your current clients and customers to remain relevant. You don’t want them to forget about you. Look for more reasonably-priced marketing partners or do a full audit and reallocate dollars from marketing initiatives that aren’t critical to your business to more effective. Just don’t slice your marketing budget too much. Marketing is about ROI. Is your firm informing you of how their efforts are paying off in real dollars?
Reduce your real estate footprint if possible
In times of uncertainty and with many people working remotely due to the COVID-19 pandemic, it may be an opportunity to discuss reducing your real estate footprint with your landlord. Are office spaces not being used? Can you reduce your square footage? Reducing your monthly lease can help with your bottom line while maintaining a brick and mortar footprint for your business. You can always reassess later when things change.
Show your employees you care while looking for efficiencies
Is it possible to outsource certain tasks to contractors? If so, you can still get the work done without adding to your payroll. Be sure you take care of your employees. People are always an organization’s most valuable resource. Make sure outsourcing tasks to contractors rather than hiring internally is clearly communicated to your staff. Transparent leadership is critical when morale can be low. Consider all your options while keeping your employees feeling confident in the business.
Stay calm and strategize/prepare for when things will turn around
This is a very uncertain time for both the U.S. economy and the world. While most of us have not lived through something quite like this, we know that the economy ebbs and flows, and eventually, things will start to return to normal. Hold on to your company’s mission, values and goals and try to remember that what goes down always goes back up.
Since opening LAB Digital, our mission has been to be a strategic, affordable marketing partner for clients of all sizes. We understand small businesses are always on a budget and even more so in a challenging economy. We’re here to help if you wanna chat more.
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