It’s been five years since the economic collapse, and not much has changed.
Sure, unemployment is now below 8 percent – not exactly as big of a win as some would claim – and consumer confidence is edging up, but far too many elements that go into the national economy are slugging along, making heralding proclamations of an economic recovery a bit misleading.
Don’t get it twisted, Congress may champion a return to economic normalcy, but then again, their opinion hasn’t exactly been in line with that of small-business owners and entrepreneurs recently.
Just look at the U.S. Chamber of Commerce’s quarterly survey for quarter four 2012. In it, 82 percent of small-business owners think the economy is on the wrong track and 54 percent believe small-business conditions will worsen in the next two years.
Not exactly rainbows and sunshine, is it?
Income.com knows the business climate in the United States is far from optimal, but that shouldn’t discourage your entrepreneurial endeavors. Other less-ambitious entrepreneurs may be dropping like flies. If you understand how to tailor your strategy to fit the needs of a down economy, you’ll markedly improve your prospects for success.
The path to success may be littered with dead ideas and businesses, but heed the advice of famous oil tycoon John D. Rockefeller: “The way to make money is to buy when blood is running in the streets.”
When a recession occurs, most tend to magnify the situation as it relates to them. Small-business owners remain grounded in reality and understand they’re not the only one feeling the crunch. Their customers are also likely squeezed by the economy.
Prioritizing customer needs and shaping your strategy to serve their interests is a requisite technique to take in a rough economy. The way to draw and retain customers is to offer them unparalleled service, one professor of marketing said.
“In tough times, it’s critical to provide the best services possible,” said Amy Ostrom, professor at Arizona State University. “By providing the best services you can to your customers, you enhance the likelihood you’ll be able to keep them.”
One way you can accomplish this is by being flexible with client payments. Granting extensions for hard-hit customers will provide them some leniency and give you some credibility. However, if a customer is taking too long or gives you concern, you may be better off stopping the transaction before it even happens and sparing yourself from a serious cash flow crisis. On the other side of spectrum, incentivizing early payments by extending an offer or discount on a customer’s next purchase would help you connect with that client on the same level.
Cut where you need, not where you want
Cutting costs in a recession is unavoidable. However, a disparity exists between entrepreneurs who cut irrationally and those who trim costs after applying logical thought to the quandary. The difference is the latter will survive and the former won’t.
Don’t slash away indiscriminately. There’s a reason that certain expenses make up the majority of your budget: you need to spend money on those functions, like financing, workforce and technology. Trim where you can, but don’t sacrifice more than you need to if it comes at a cost to your long-term vision.
Look for more logical areas of cost savings. For instance, if you’re using direct mail or telemarketing to market to customers, it’s time to jibe with the 21st century and stop paying for outdated marketing methods when social media comes at a miniscule fraction of that cost. Work at an office? Making sure you turn your computers and lights off before you or the last one out leaves will shave precious cents and dollars off your electricity bill. Renegotiate supplier contracts – such as those for paper or internet – to ensure you’re getting your absolute money’s worth out of what you’re already paying.
Don’t forget savings through tax deductions. Thinking of leasing or financing small-business equipment? It might be time to pull the trigger and put that equipment into place for tax year 2013. Under the parameters of the fiscal cliff deal, the Section 179 deduction allows entrepreneurs to deduct up to $139,000 of leased or financed equipment purchases of no more than $560,000.
Income.com can feel the pressure entrepreneurs are under in these times of great economic uncertainty. However, stick to your guns and don’t let the downtrodden economic situation dissuade you. Always remain aware of customer needs and look for opportunities to enhance your services. Cut costs after doing the due diligence and maximize savings through tax break avenues. Pressure makes for a business environment ripe for fostering entrepreneurial innovation. How you realize this potential is up to you.