We had thought about using “Independence County Businesses AND the “R” Word” as the title of this article, but was reminded by some of my economist friends that the U.S. Economy is not OFFICIALLY in a recession. The agency responsible for making that call has yet to decide. But whether the economy is in an official recession yet or not…. many business owners around the region are struggling with slowing consumer spending combined with higher costs, much due to transportation related costs brought on by higher fuel prices, and that is causing a big squeeze on their bottom line. A number of business owners we have spoken to in the past three months have complained that fewer customers are coming in and those that do are spending less. However, these same owners are seeing their cost of doing business increase and it is creating real problems with liquidity.
The bad news is… recessions happen. The good news is… they are followed by renewed periods of economic growth, usually at even higher levels than before the recession. IF the economy does go into a recession it will recover. Since 1980 there have only been seven recessionary periods and they have always been followed by stronger periods of growth. Of course if your business is the one that fails during that period it will not seem like a minor recession to you. If the economy does slip into an “official” recession will it follow the same trends as the recent past? Who knows? Certain factors do make the current conditions a little more unique; the fact the country is involved in a protracted war that must be funded and the ever increasing price of gasoline which will not be coming down could mean a different economic landscape once the recession does end.
Individually,
First: Get your head out of the sand; quit wringing your hands and start planning. Regardless of economic conditions, successful business owners should take some time each week to scan their environment, looking for clues from outside sources as to which way the wind is likely to blow in coming months. Subscribe to and read information in your association newsletters and certainly read the business section of your local newspaper. You can learn a lot about what may be coming just by looking for:
· Monthly reports by big box retailers like Wal-mart and Target. Consumer spending makes up 70% of this nation’s GDP. If they start posting declines may be a good indicator for your business.
· Watch the Fed (Federal Reserve) announcements about changes in interest rates. The Fed does not drop interest rates because things are going well. They drop interest rates because they see signs the economy is deteriorating and are trying to prop it up by making money cheaper to buy.
· Watch state and local employment reports; more large companies laying off workers the less money is in your local area for purchases by those folks who lost their jobs.
· Finally, pay attention to reports on inflationary moves. When the prices for necessities such as food, clothing, and gasoline increase at a faster rate than wages, consumers feel they are less well off and will curtail spending accordingly.
None of these simple steps takes a degree in Economics but it can help a business owner “read the tea leaves” and start to make plans to adjust in response.
Second: It is time to take your marketing plan off the shelf. The past economic booms have made many businesses lazy. When consumer spending grew they were able to pick the “low hanging fruit”. But when economic times get tougher, successful businesses know that survival means developing a marketing game plan. All businesses are in the relationship business and smart entrepreneurs know this. Marketing is not “Madison Avenue”; it is not just advertising or sales gimmicks. Marketing is about developing and maintaining real relationships with your customers. A recession is not the time for a “take it or leave it” approach to business. There are hundreds of simple low cost, even no cost marketing techniques that any business can take advantage of that will sustain and even grow a business in tough times, but they have to take the time to learn.
Third: It is time to take a hard look at the financial operations of the business, especially those that have a direct impact on cash flow and liquidity. A knee jerk reaction of too many businesses in recessions is to take out the carving knife and start wholesale slashing of costs without regard to how that expense supports the business. Too many business owners immediately cut advertising or wholesale lay offs of employees without regard to long term implications. The key is careful review of all expenses and then careful decisions that cuts the FAT, not the muscle of the business. Other simple financial management tools include developing realistic inventory control plans, review of credit decisions to customers and developing good collection policies to ensure faster in flow of cash.
In the mean time what can individual businesses do to survive, maybe even thrive during these times? The Batesville Area Chamber of Commerce and the ASU Small Business Development Center have teamed up to offer a special workshop for area businesses called Growing Your Businesses During Difficult Economic Times, (Recession Proofing Your Business). This workshop will be offered from 6-9:00 p.m. on Tuesday, October 14th and again from 1-4:00 p.m. on Wednesday October 15th at the University of Arkansas Community College in Batesville. Call the chamber at (870) 793-2378 for more details. The workshop is free to all area businesses thanks to contributions from The Citizens Bank, First Community Bank, First National Banking Company (FNBC), Liberty Bank of
Economic downturns happen…it is a business fact of life, but proper prior planning can often make the difference between success or failure. The Batesville Area Chamber of Commerce wants you to be a survivor and we can help.
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