Creative Business Solutions for Tough Economic Times - Part 3

Now that you know where to find out about they economy and you've determined that it will affect your business, what do you do?

The next step is to determine how the economy will affect your business and how to manage those effects. Consider the following two scenarios:

Problem 1: Supply and transportation prices go up
Obviously when the price of your supplies and transportation costs go up, your manufacturing and sales costs go up, which means you must pass the costs on to your customers. If you are a baker and the price of flour doubles (which it has in some areas), you must now re cost your products and increase your prices. Many consumers are unaware of small increases (i.e. a loaf of bread increasing from $2.00/loaf to $2.25/loaf) but are accutely aware of large increases (i.e. a car for $20,000 increasing to $22,500).

Strategies to Manage Problem 1

• In most cases there will be little or no room to negotiate with suppliers but it is always worth trying. I have a client who had a long-term relationship with a supplier and always paid the catalog list price without question. One day in a conversation with the supplier's rep - they were talking about rising costs - he mentioned that because of the volume of sales over the years, my client was entitled to a discount. Wow - if that conversation hadn't taken place, my client might never have received that discount. Moral of the story - it pays to ask for discounts.
• When you have to increase your prices, a strategy that several of my clients have found helpful is this: give your customers as much notice as possible; convey the news to them in a tone that is regretful but puts the blame where it should be (economy, rising fuel and transportation costs); and encourage them to stock up at the lower prices. This strategy works because your customer has time to get used to the idea, places blame on the faceless "economy" rather than you, the business owner, and gives your customer the impression that you care enough to hold prices down as long as possible for their benefit.

Problem 2: Consumers stop spending
Before consumers start to feel the pinch of a recession they will often start reining in their spending in anticipation of it. This early reaction hurts businesses and can lead to unnecessary panic in the economy. Your job is to find ways to diversify and encourage your customers to keep spending their money in your business.

Strategies to Manage Problem 2
Your job as a small business owner is to find ways to diversify and encourage your customers to keep spending their money in your business. Think from your customers' point of view - what would it take, in this difficult economy, to keep them shopping at your store or place of business.

• Excellent customer service? Above-and-beyond customer service?
• Easy ordering and delivery process?
• Convenience?
• More options?
• Better selection?

You may need to survey your customers and find out. From my personal grocery shopping experience, I am willing to pay a little more when I know that a store is easy to get to, is not cluttered and dirty, and when I know I'll be greeted with a "hello" and a smile. Assess your business and find out if there are any barriers to a great purchasing experience. There should never be, but in these economic times you can't afford for there to be.

Next time, we'll look at the issue: What if the business is just not making it?

Creative Business Solutions for Tough Economic Times - Part 2

The first step to dealing with difficult economic times is acknowledging that they are here and learning more about what they mean to your business. As a small business consultant I am often surprised by how out of touch some folks are about the economy in their community, their country and especially in the world.

In order to plan and strategize for your business during tough economic times, you need to know what is happening in the world, your country and your community. This doesn't mean that you have to read every economic journal and article but you should talk with people in the know (your local economic development centre for example), read the business section of a national newspaper at least once a week, listen to radio news, watch business news and look on the internet. Some helpful Canadian economy sites are:

http://www.canadianeconomy.gc.ca/english/economy/
http://www.economist.com/countries/Canada/profile.cfm?folder=Profile-Forecast

Now that you know more about the economic forecast and trends nationally, will your business be affected? In my opinion all businesses - even essential ones such as food sellers and fuel manufacturers - will be affected, but some will be more affected than others. Let's face it, every business is affected by the health and well being of other businesses. If you own a bakery then the price of your products will be impacted by the global (commodity) price of wheat as well as the rising cost of fuel to get the wheat from the wholesaler to your place of business. The volume of your sales will be impacted by consumers' willingness to spend money on non-essential items (confectionaries and higher priced items, for example).

If your business fits into any of the following categories (or more than one), your business will be affected:

• business is dependent on commodities (wheat, rice, metals, etc) - for example most types of manufacturing,
• business is dependent on fuel-intensive transportation - for example agriculture, wholesale goods, secondary manufacturing
• business is dependent on consumers who are willing to spend money on "extras"
• business is unable to be diversified

In the next installment of this blog, I will discuss ways to plan and strategize for your business.

Creative Business Solutions for Tough Economic Times - Part 1

Owning your own business in this economy can be tough. Many small business owners are finding that sales are down, costs are up, quality employees are hard to find and moral in general is low. It can be a lonely and scary time.

For those businesses which are doing well in this economy - and there are some - keep it up but don't be cocky! For those of you who are struggling or are uncertain, now is the time to step back from your daily operations and take a long hard look at what you are doing and what you could be doing.

There is a well known philosophy for business owners that you should be working on your business, not working in your business. I personally subscribe to this philosophy and encourage my clients to live it too, yet I understand how hard it can be. When times are tight there is sense of urgency and fear, and the desire to lay off staff and take on jobs ourselves can be tempting. While this may be the only solution for some small businesses - the closer you are to closing a business the more likely this may be true - it is the opposite of what most business must do.

The upcoming series of articles (Creative Solutions for Hard Times) is written for business owners who are struggling in this economy and are looking for creative ways to work on their businesses.

Attributes of a Successful Business Owner

Being self-employed or starting a business takes hard work, patience and determination, but it is more than that. It takes entrepreneurship, dedication and commitment, but it is more than that. It takes someone who is organized, willing to learn from mistakes and keep going, even in the tough times.

Here are some of those characteristics:

• Hard worker – the days will be long and busy
• Patient – the rewards may come slowly
• Determined – “I will make it no matter what”
• Entrepreneurial – Able to see opportunities and analyze risk
• Dedicated and Committed – able to follow through
• Organized – able to manage many tasks and responsibilities
• Willing to learn from mistakes – we all make them
• Able to keep going in the tough times

Other important characteristics include:

• Good health and emotional stability – able to work through sickness
• Self control – able to forgo a social event when the business needs you
• Self confidence – “I can and will do this”
• Far sighted and detail oriented
• Realistic – seeing things as they are and dealing with them

The transition from being an employee to being self-employed is a difficult one for some people. As an employee we may be used to: going in to work when we’re asked and leaving at the end of our day; receiving a regular paycheque, benefits, sick days, holidays and other perks; someone else worrying about where the money will come from. Being prepared for the reality of self-employment is crucial. If you look at these lists and assess yourself honestly, and if you don’t see yourself embodying most if not all of those characteristics, don’t do it – work for someone else.