The World economy has definitely been suffering and the Caribbean has not been exempted. Below is a fantastic article adopted from Dell Small Business on Surviving the slowdown. It gives sensible and doable tips on cutting corners without cutting your valuable Human Resources. Enjoy!!
5 Strategies to Survive the Economic Slump
The economic slowdown is hitting small businesses hard. According to the 2008 Economic Pulse survey from American Express OPEN, 79% report a drop in sales and 69% have been forced to cut expenses. Squeezed by energy and healthcare costs, rising prices and sluggish sales, small business owners are also reducing staffing, spending and expansion plans. To make ends meet, more than half have tapped personal assets to pay their business bills.
If you are feeling a similar pinch, use the following tips to help improve your cash flow and weather the economic downturn.
Improve billing
Review your accounts, collect outstanding invoices and revamp your billing system to make sure you are paid for work you have completed. Invoice promptly and encourage customers to pay quickly with credit and charge cards, bank transfers or checks. Consider a carrot-and-stick approach to billing and collections. If payment is due in 30 days, offer an incentive, such as 2% discount, to customers who pay early or within 10 days. Add a 1.5% interest charge after 30 days. Consider beefing up your credit-checking procedures for new accounts to avoid taking on customers who might have trouble meeting their commitments.
Stretch out payables
Pay your bills on time, but not early, thereby keeping cash on hand as long as possible. You may need to revise your payment habits, perhaps even paying bills more frequently so you part with less cash each time. The only time to pay early is if your creditors offer an early pay discount. Set up your online banking account to pay bills automatically, on the days you want the money deducted, and to notify you if your balance runs low.
Trim expenses
Your fixed costs may be more variable than you think. Review all of your expenses and renegotiate rent/lease agreements, staffing and supply costs. Small and midsize businesses have been knocked hard by energy costs, so look for ways to cut back on transportation (vehicles, delivery and travel) and electricity. Compare your phone and Internet service bills with the best deals out there. Check your monthly statements for hidden fees, extra charges and price creep. Scrutinize small-ticket expenses for savings opportunities. For example, would purchasing office supplies and printing in bulk save money? Or, instead of next-day delivery, send less time-sensitive mail through the U.S. Postal Service. Be sure to involve your employees and ask them for cost-cutting ideas.
Review pricing
Think strategically before you raise or lower your prices during an economic slump. Neither is a quick fix. According to the OPEN1 Economic Pulse survey, only 33% of the respondents said they expect to raise prices. Increasing rates and adding surcharges to cover costs of doing business isn’t likely to provide sufficient easing of financial pressure if your sales have dropped dramatically. Lowering prices to bring customers in the door may work, as long as you have calculated that you can still operate profitably with lower prices in place. If not, you may be sorry that you “trained” your customers to expect a low price when the time comes to raise prices again.
Increase service and marketing
It might sound counterintuitive to focus on customer service and marketing during challenging times, since both cost money. However, when the economy slows, it becomes more important than ever to keep the customers you have. Chances are you can little afford to lose any of them. In addition, a customer you lose today will cost you mightily to acquire when the economy picks back up. Keep your customers loyal by focusing on service. Emphasize your company’s unique value to limit the likelihood that a competitor hungry for business will be able to lure them away. Keep your acquisition “machine” churning, even if budgets are tight, by using low-cost marketing tactics, such as search engine optimization and email marketing.
