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THE SURVIVAL TIPS FOR
SMALL BUSINESSES

You may be in Mail Order, Direct Mail, or you may be a local

merchant with 150 employees; whichever, however or

whatever---you've got to know how to keep your business alive

during economic recessions. Anytime the cash flow in a business,

large or small, starts to tighten up, the money management of

that business has to be run as a "tight ship."

 

Some of the things you can and should do include protecting

yourself from expenditures made on sudden impulse. We've all

bought merchandise or services we really didn't need simply

because we were in the mood, or perhaps in response to the

flamboyancy of the advertising or the persuasiveness of the

salesperson. Then we sort of "wake up" a couple of days later and

find that we've committed hundreds of dollars of business funds

for an item or service that's not essential to the success of our

own business, when really pressing items had been waiting for

those dollars.

 

If you are incorporated, you can eliminate these "impulse

purchases" by including in your by-laws a clause that states:

"All purchasing decisions over (a certain amount) are contingent

upon approval by the board of directors." This will force you to

consider any "impulse purchases" of considerable cost, and may

even be a reminder in the case of smaller purchases.

 

If your business is a partnership, you can state, when faced with

a buying decision, that all purchases are contingent upon the

approval of a third party. In reality, the third party can be

your partner, one of your department heads, or even one of your

suppliers.

 

If your business is a sole proprietorship, you don't have much to

worry about really, because as an individual you have three days

to think about your purchase, and then to nullify that purchase

if you think you don't really need it or can't afford it.

While you may think you cannot afford it, be sure that you don't

"short-change" yourself on professional services. This would

apply especially during a time of emergency. Anytime you commit

yourself and move ahead without completely investigating all the

angles, and preparing yourself for all the contingencies that may

arise, you're skating on thin ice. Regardless of the costs

involved, it always pays off in the long run to seek out the

advice of experienced professionals before embarking on a plan

that could ruin you.

 

As an example, an experienced business consultant can fill you in

on the 1244 stock advantages. Getting eligibility for the 1244

stock category is a very simple process, but one with tremendous

benefits to your business.

 

The 1244 stock encourages investors to put equity capital into

your business because in the event of a loss, amounts up to the

entire sum of the investment can be written off in the current

year. Without the "1244" classification, any losses would have to

be spread over several years, and this, of course, would greatly

lessen the attractiveness of your company's stock. Any business

owner who has not filed the 1244 corporation has in effect cut

himself off from 90 percent of his prospective investors.

Particularly when sales are down, you must be "hard-nosed" with

people trying to sell you luxuries for your business. When

business is booming, you undoubtedly will allow sales people to

show you new models of equipment or a new line of supplies; but

when your business is down, skip the entertaining frills and

concentrate on the basics. Great care must be taken however, to

maintain courtesy and allow these sellers to consider you a

friend and call back at another time.

 

Your company's books should reflect your way of thinking, and

whoever maintains them should generate information according to

your policies. Thus, you should hire an outside accountant or

accounting firm to figure your return on your investment, as well

as the turnover on your accounts receivable and inventory. Such

an audit or survey should focus in depth on any or every item

within the financial statement that merits special attention. in

this way, you'll probably uncover any potential financial

problems before they become readily apparent, and certainly

before they could get out of hand.

 

Many small companies set up advisory boards of outside

professional people. These are sometimes known as power Circles,

and once in place, the business always benefits, especially in

times of short operating capital. Such an advisory board or power

circle should include an attorney, a certified public accountant,

civic club leaders, owners or managers of businesses similar to

yours, and retired executives. Setting up such an advisory board

of directors is really quite easy, because most people you ask

will be honored to serve.

 

Once your board is set up, you should meet once a month and

present material for review. Each meeting should be a discussion

of your business problems and an input from your advisors

relative to possible solutions. These members of your board of

advisors should offer you advice as well as alternatives, and

provide you with objectivity. No formal decisions need to be made

either at your board meeting, or as a result of them, but you

should be able to gain a great deal from the suggestions you

hear.

 

You will find that most of your customers have the money to pay

at least some of what they owe you immediately. To keep them

current, and the number of accounts receivable in your files to a

minimum, you should call them on the phone and ask for some kind

of explanation why they're falling behind. if you develop such a

habit as part of your operating procedure, you'll find your

invoices will magically be drawn to the front of their piles of

bills to pay. While maintaining a courteous attitude, don't

hesitant, or too much of a "nice guy" when it comes to collecting

money.

 

Something else that's a very good business practice, but which

few business owners do is to methodically build a credit rating

with their local banks. Particularly when you have a good cash

flow, you should borrow $100 to $1,000 from your banks every 90

days or so. Simply borrow the money, and place it in an interest

bearing account, and then pay it all back at least a month or so

before it's due. By doing this, you will increase the borrowing

power of your signature, and strengthen your ability to obtain

needed financing on short notice. This is a kind of business

leverage that will be of great value to you if or whenever your

cash position becomes less favorable.

 

By all means, join your industry's local and national trade

associations. Most of these organizations have a wealth of

information available on everything from details on your

competitors to average industry sales figures, new products,

services, and trends.

 

If you are given a membership certificate or wall plaque, you

should display these conspicuously on your office wall. Customers

like to see such "seals of approval" and feel additional

confidence in your business when they see them.

Still another thing often overlooked: If at all possible, you

should have your spouse work in the business with you for at

least three or four weeks per year. The important thing is that

if for any reason you are not available to run the business, your

spouse will be familiar with certain people and situations about

your business. These people should include your attorney,

accountant, any consultants or advisors, creditors and your major

suppliers. The long-term advantages of having your spouse work

four weeks per year in your business with you will greatly

outweigh the short-term inconvenience. Many couples share

responsibility and time entirely, which is in most cases even

more desirable.

 

Whenever you can, and as often as you need it, take advantage of

whatever free business counseling is available. The Small

Business Administration published many excellent booklets,

checklist and brochures on quite a large variety of businesses.

these publications are available through the U.S.Government

printing office. Most local universities, and many private

organizations hold seminars at minimal cost, and often without

charge. You should also take advantage of the services offered by

your bank and local library.

 

The important thing about running a small business is to know the

direction in which you're heading; to know on a day-to-day basis

your progress in that very direction; to be aware of what your

competitors are doing and to practice good money management at

all times. All this will prepare you to recognize potential

problems before they arise.

 

In order to survive with a small business, regardless of the

economic climate, it is essential to surround yourself with smart

people, and practice sound business management at all times.

 

 


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