We’ve all seen the headlines. Last week USA Today led the way saying, “Tight Credit Costs Small Business Owners.” This was followed by the New York Times proclaiming, “Small Businesses Feeling the Chill” and the Wall Street Journal’s “Entrepreneurs Scramble for Financing.” Tuesday night it was one of the lead stories on the CBS Evening News.
Since we entrepreneurs are actually living this crisis every day, I don’t want to rehash the bad news. Instead, I’m assuming you’re looking for advice and solutions on how to deal with the situation. So I turned for answers to two of the smartest people (and long-time successful entrepreneurs) I know in the area of small business and money issues.
Rosalind Resnick is the founder and CEO of Axxess Business Consulting, a management consulting company for small and mid-sized businesses. Tom Markel is the founder and CEO of iBank, an online information bank where entrepreneurs can access networks offering business loans, insurance, and capital. (In the spirit of full disclosure, I know Rosalind and Tom personally and Tom is a client of mine.)
Both Rosalind and Tom believe that entrepreneurs should not wait for the tough times to pass, but should continue to aggressively grow their businesses. Tom Markel says, despites the news to the contrary, entrepreneurs can still find financing. Here are his top five tips:
- Use your assets. Markel says there’s been a “substantial increase” on iBank.com in the number of lenders seeking to make asset-based loans. So those of you with have strong assets (inventory, accounts receivable, equipment, or real estate) might have more luck pursuing an asset-based loan.
- Stick close to home. Markel advises you to try local lenders (smaller regional banks), credit unions, and private investors.
- Get comfortable with equity financing. I know many of you are reluctant to give away a piece of your company. But, according to Markel, that reluctance could kill your business. He warns against looking for investors indiscriminately though, adding “you need smart money.”
- Be detail-oriented. Martha Stewart may never have written a business plan (or so she once told me), but Markel says your loan package needs to be strong and include a business plan, a competitive analysis, complete financials, client referrals, and a SWOT (strengths, weaknesses, opportunities, and threats) analysis.
- Curb spending. Markel advises entrepreneurs to look for places where you can cut spending (both personal and business spending), but warns against being “penny-wise and pound-foolish.” As we’ve discussed in this column before, this is not the time to stop marketing or investing in new technologies.
Rosalind Resnick says instead of buying into the doom and gloom, entrepreneurs need to “get back to work and avoid making any decisions that you’ll [later] regret.” Here are five of her “don’ts”:
- Don’t cut your prices. Resnick says unless you are absolutely certain that lowering prices will boost sales (which rarely happens), you shouldn’t do it. Cutting prices generally leads to lowered profits.
- Don’t give up the money hunt. Like Markel, Resnick encourages entrepreneurs to continue to look for capital. You might have to lower your valuation or seek less money, but, she adds, there’s still cash out there for “entrepreneurs persistent enough to find it.”
- Don’t stop networking. You can’t be reactive, sitting around waiting for the phone to ring. Resnick says networking is more important than ever, adding “the more leads you generate, the more sales you’ll bring in.”
- Don’t stop talking. You have to keep the conversation flowing with your customers (who are “your lifeline, telling you what the marketplace wants and need”) and your vendors. Maintaining a good relationship with your suppliers is vital, Resnick says. They can even help you through some tough times — just don’t wait until you’re out of money before you contact them.
- Don’t stop thinking about tomorrow. According to Resnick, “A good idea is a good idea no matter what’s happening in the economy. If you’ve got an idea you think will set the world on fire, the time to go for it is now! ”
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