If your small business is taking a beating from the most recent economic crisis, you are not alone. About 92 percent of small businesses nationwide have been bruised. But for small manufacturing business owners unwilling to give in to the sinking economy, here are some steps you can take.
It is likely your small business spends hundreds of dollars for every hour you’re in operation. So the first step you can take is cutting operation hours. Economic turmoil translates into fewer incoming orders, which means less work for your employees and equipment. If you run out of production work during the day, send your floor employees home and turn off your equipment. Many small businesses in manufacturing have cut hours 30 percent to 50 percent, moving from 50- to 60-hour work weeks to 35 hours.
Temporarily Lay Off Employees
If you are facing a significant drop in orders, you may find yourself with more employees than you actually need. Many manufacturers have managed to keep it under wraps that their floor production employees have been temporarily laid off. It isn’t rare to see managers taking over for laid-off employees, running production and picking up the responsibilities of inspection and shipping. Consider how much manpower your business actually needs to meet its orders. This single defensive move could decrease your payroll by 60 percent. (Be sure to check your state’s unemployment laws to make sure your employees can keep their state benefits during this time.)
Stay in close contact with your customers; you need their business. Find out what their financial health is projected to look like over the next few months. Will their orders continue to be strong and steady, or should you expect a reduction? Also, send them a complete company brochure to remind them of all your services. Perhaps you can give them a better deal on a service or a part they are getting through another supplier. Investigate their needs and negotiate more purchases.
If you’ve noticed your customers reducing their orders by huge numbers or in some cases canceling them completely, they have probably shut down production for a few months to stabilize their business’s failing health. If this is the case, be on the lookout for new customers. A great place for a manufacturer to start the search is at production shows and conventions. Become a regular attendee at your regional powder coating, printing, or electronics show to showcase your services. If you prefer the conventional route, make phone calls and send samples of your work to potential customers.
Negotiate Supply and Demand
Small businesses are struggling to find balance between what their vendors are supplying and what their customers are demanding. If your region is suffering from economic recession, it is likely two things are happening. First, your customers are reducing orders to match a declining demand for their products. Second, your suppliers want to get rid of as much raw material as possible. For example, your supplier may tell you that in order to purchase a certain material from them you must buy it in bulk quantities of 2,000 parts. But your customer is only requesting 500 units of that part. This situation sets you up to either lose business or lose cash. Instead, ask your customer to sign a letter of commitment stating they will pay for the ordering of all 2,000 parts. Only charge them for the cost of ordering; disregard costs for production and labor until the completed order is actually processed to them. Also, commit to reserving those parts for that particular customer’s future orders.
Increase Your Credit Line
Request a temporary increase of your credit line for anywhere from 60 to 120 days. It may seem illogical to spend more money with a shrinking budget, but if your business is on the brink of closing because you can’t afford utilities and raw material, this extended account may be the only defense that will save you from closure.
Take Simple Steps
Become conscious of unnecessary spending. Turn off lights and computers and unplug the vending machine at night. Eliminate lawn care services, holiday parties, and costly hotel reservations for overnight business trips. Join other small businesses around the nation and reduce or banish bonuses. That alone could save your company thousands of dollars. Individually these steps seem futile but when pursued as a new habit they produce results. Every step you take, however miniscule, is another dollar saved.