Small businesses, without ample capital reserves, are in the most precarious position during unstable economic times. Simultaneously, consumer cutbacks may already be reducing your reserves. Credit is no longer available for many potential borrowers, making access to cash extremely difficult.
A lack of liquidity (cash) has become so severe and widespread that excellent credit scores are required to purchase cars, secure small business loans, or borrow money for college. There is so little cash available that it’s only being lent to those with the very best credit histories because banks can’t afford to assume any additional risk. Unfortunately, years of negligent government oversight and the repeal of government regulations have resulted in the need for government intervention (now) to prevent our entire financial system from collapsing.
With opinions hovering at 99 percent against and 1 percent for, citizens are contacting Members of Congress strongly opposing the Treasury Department “bailout” plan. The truth about the credit crisis: no one has a clue whether the Treasury “bailout” will be effective or what will happen to the economy over the next week, month or year. We are living in a period of economic uncertainty.
We do know that a lack of regulations and oversight of the financial industry resulted in the mortgage meltdown, which has devolved into this credit crisis. There is a plea to allow the same greed motivated markets, which created the mess, to clean it up. This seems akin to believing a cabal of sloppy train engineers, who ran their trains off tracks into gullies, have the ability to get all the damaged cars back onto the tracks and functioning again while caring for the many injured passengers.
What can you do in the face of these uncertain times?
Audit your expenses. With the eye of the most dispassionate accountant, analyze your expenses. Look for places you can cut without diminishing the quality your customers or clients expect. There can be a tendency to say, “That’s only $25.00 a month.” or “This never runs more than $50.00 a month.” When you’re looking for ways to cut expenses, make a notation of all the large and small amounts that could be eliminated. Add them up. You might be surprised by the total.
Add a line of essentials. If your business does not supply essentials that people need during an economic downturn, can you add a line of products or services that will attract people who must take care of basic needs?
Engage in creative rebirth. When sales begin to drop, before your company faces instability, re-think your business. Evaluate your talents and the needs of your market. Talk to your customers about their primary needs today. It’s much easier to re-direct your business focus before it tanks than to start over from scratch during a time of economic constriction.
Operate on a lean budget. While you might still be humming along as if there is no recession, it’s likely the economic pinch will eventually hit your revenues. Plan for it.
- Clean up unnecessary costs.
- Pay off debt.
- Build up cash reserves.
- Delay capital expenses.
- Look for opportunities to increase profitability.
Current projections indicate we will not see a widespread economic upturn until into 2010 or later. Businesses that figure out how to fulfill customer needs and eliminate unnecessary expenses during these challenging times will thrive their way through the downturn and soar into greater success when the economy improves.