Ask anyone from a bank economist to the owner of your local hair salon about the economy and you’ll probably get the same answer: The U.S. economy is going to continue to struggle next year. The question is will you see that as a problem or as an opportunity?
Surviving, and Thriving, in Slow Times
- It’s likely that as in past recessions, many new small businesses will be created in the coming year as laid-off workers rethink their careers. How will these businesses survive, along with all the other small businesses already struggling out there? Only by being cunning and cost-smart say experts in business and entrepreneurship. The following include some of their tips for getting through the slow times:
- Strike a deal: Right now, everything is negotiable,” says Rieva Lesonsky, CEO of the business consulting firm SMB Connects in Irvine, California. “If you go in and talk to people, employees are willing to cut deals. Ask for a break with everyone, even your landlord.”
- Get creative about financing: Bank financing may be tough to come by next year unless you have a stellar credit rating. We’ll likely see a shift from more capital-intensive startups to those such as e-commerce firms, which are more easily self-funded or launched on friends-and-family money. Business funding may also come from an unusual source next year: private foundations, says Tom Ruhe, director of entrepreneurship at the Marion Ewing Kauffman Foundation, a Kansas City, Missouri-based organization dedicated to advancing entrepreneurship. For example, as other funding dries up, look for environmental foundations to fund renewable-energy startups. Private equity may remain a viable funding source next year, as poor stock returns leave some investors looking into other investments, says Lawrence Gelburd, a lecturer at the Wharton School’s Entrepreneurial Management Program at the University of Pennsylvania in Philadelphia. “When you’re wealthy and you want to get a 10 percent to 100 percent return on capital,” he says, “you [eventually] run out of places to go except funding startups.”
- Review your business plan: When business is slow, spend time reexamining every aspect of your business plan. Take a hard look at your company’s overall direction and determine whether it’s the right one, Ruhe says. “You can’t change a tire while you’re going 100 miles an hour,” he notes. “So now’s the time to do it.”
- Find a new audience: One way to juice up your business in a slowdown is to find new applications for your product or new markets for your service. Ruhe notes the example of Play-Doh, which was used to remove coal residue from walls originally but was re-imagined as a children’s sculpting material when the original market died out.
Don’t get mired in the negativity circulating about the economy. Instead think about the entrepreneurs who bought assets cheap during the Depression and rose to become multimillionaires. This time around, that could be you, says Harry DeWolf, a Portland, Oregon–based district director for the Small Business Administration.
Start a business that buys cheap real estate assets, for instance. Or think about entering growing fields such as health care or business consulting, which is on the rise as large corporations outsource functions they previously did in-house.
Market your business aggressively to project a positive, successful image, DeWolf advises. For starters, upgrade your Web site. “Your site can project a solid, quality image for you 24/7,” DeWolf notes. “Also, use Internet networking and go to good old-fashioned chamber of commerce events and business events at convention centers. Get out there. Don’t curl up in a ball.”
Another strategy is to co-market with other local small businesses. Team up with companies offering complementary products or services to offer customers package deals, says SMB’s Lesonsky.
Some experts see a ray of hope coming in 2009 with President Barack Obama. Lesonsky is optimistic Obama will return the SBA to a more proactive approach to helping small businesses, as the agency exhibited under the Clinton administration.
SBA director DeWolf, meanwhile, says Obama’s arrival may have a positive impact on consumer confidence and in turn on consumer spending. “The prospect of a new administration is giving people some light at the end of the tunnel,” he says. “You’re going to see slow, incremental improvements in consumers’ perceptions.”