During the last few weeks I've received letters and comments from business owners that reflect their uneasiness with the European financial crisis and its potential impact on the U.S. economy. They worry that "things could really get bad again" but they don't exactly know how or when.
One business woman asked, "Is it better to try to prepare for some worst case scenario or just wait until it happens and deal with it then?"
Years ago, during a similar period of economic uncertainty and sluggish growth, I read an expansion business plan that was written by a gas drilling rig equipment owner. It was a bold plan especially when U.S. gas drilling had stalled out because of declining gas prices. When I asked the owner why he believed his business could survive, let alone succeed he said something like this.
"My advantage is my attitude. All of my competitors are complaining about the market and waiting for it to turn around. In the meantime, there are still opportunities out there and I will be the only one pursuing them. If you think the market is dead then soon your business will be dead."
I agree. It is dangerous for business owners to adopt a turtle-like "wake me when it's over" mentality.
Here are some recommendations to help replace unproductive angst with business building activity.
- Seek more customers. In the spirit of the rig operator, now is the best time to go out and pitch new customers. So what if the sales cycle (the time it takes to solicit and receive a first order) may be longer than in years past! Owners should spend at least one day a week pursuing new customers. Here's another benefit of initiating a new sales campaign. Your employees will be inspired by your confidence and commitment to resist defeat.
- Evaluate business weaknesses. Owners should ask every employee or manager the following question: What sudden single event would be heart stopping bad news for your department? It could be the loss of a the top sales rep to the competition, loss of a big account, loss of a production source, loss of a bank credit line, etc. Once the owner has identified the top areas of vulnerability throughout the company, then the entire staff can work together to come up with action steps to reduce operating risk. Not only will the business benefit from the proactive steps taken but employees will feel more productive addressing problems rather than worrying about them.
- Watch customer payment patterns closely. No matter how badly you want to serve new customers, it's not worth your time to serve dead beat customers. Owners should also watch out for customers who over-order (probably because they lost their credit privileges elsewhere) with no intention of paying you on a timely basis, if ever.
- Prioritize payments. For business owners in extreme cash flow distress, it's worthwhile to establish bill paying priorities. Salaries and payroll taxes should always come first. If owners don't make timely payroll tax payments, interest and penalties can mount up quickly. Plus, owners are personally responsible for these payments even if their business is structured as a corporation or limited liability company. Next, owners should pay obligations that are backed by a personal guarantee, such as credit cards.
Yes, attitude and actions do matter. If startup entrepreneurs and business owners pause too long, they make it easy for their competitors to pass them by.
Susan Schreter is a 20-year veteran of the venture finance community, MBA-level educator and policy advocate for small business owners. Her work is dedicated to improving startup operating performance with reduced personal risk to entrepreneurs. She is the founder of www.takecommand.org, which offers the largest centralized database of regional and national small business funding sources in the U.S., including angel clubs, micro-finance lenders, venture capital funds and more. Follow Susan on Twitter @TakeCommand