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How Your Business Can Thrive During an Economic Storm
Economic Storm is also known as :
Economic Storm,
Essential Strategies for Weathering the Economic Storm,
Perfect Economic Storm,
Global Economic Storm,
Path of an Economic Storm,
Economic Storm Clouds Breaking,
Portrait of a Perfect Economic Storm,
Economic Storm Chances,
Product Price Sensitivity,
Financial Creativity,
Foundation Rides Out Economic Storm,
Difficult Economic Times,
World Economic Storm,
Weathering the Economic Storm,
Global Economic Storm Thanks,
Another Economic Storm,
Steps for Weathering,
Economic Storm Navigating,
Prospering in the Economic Storm,
Economic Downturn,
Riding Out Economic Storm,
Global Economic Downturn,
Design to Weather Economic Storm,
Ridding Out Economic Storm,
Buffered from the Economic Storm,
Broken in Economic Storm.
Most businesses are impacted by the slow economy. Sales may be down,
costs are up, and credit is tight. Only smart companies will be able to
manage the challenges and become stronger and more vital for the
experience. Here are some ways you can take advantage of current
conditions to help your company shine.
TAKE ADVANTAGE OF TAX OPPORTUNITIES.
The Economic Stimulus Act of 2008 created two important tax breaks
that apply only for 2008. Use them now to upgrade your equipment or
miss out on this tax-saving opportunity.
First-year expensing of equipment up to $250,000. Instead of
depreciating the cost of equipment over five years, seven years or more
(the period is fixed by law), you can opt to deduct the cost in the
year the equipment is purchased and placed in service. The expensing
option applies not only to computers, office furniture, machinery, and
other equipment, but also to off-the-shelf software.
50% bonus depreciation. Half the cost of new equipment purchases can
be deducted in the first year, with the balance depreciated over time.
Bonus depreciation can be combined with first-year expensing to produce
dramatic write-offs. Both breaks can be used whether equipment is
purchased for cash or financed in whole or in part.
USE TECHNOLOGY TO WORK SMARTER .
Companies that are watching costs and may be running with a tight
workforce can save time and money while improving efficiencies by
employing useful applications.
Integrate software to reduce data input time and save training time spent
learning multiple products.
Instead of finding a different software application for every business
process"accounting, customer-relations management, etc."look for a
single, integrated solution to handle your business processes. With
this approach, staff will be more productive; they will learn one
application faster than several applications; and they will save time
by entering data into just one system.
Automate business processes and scheduling. Use
technology to handle routine business processes (such as materials and
production planning for manufacturers) so you can manage higher
administrative volume without increasing staffing levels. You can also
use scheduling tools to better administer staff utilization.
In-source. Outsourcing is often thought of as a way
to save money. In reality, you can save money and maintain greater
control if you manage tasks in-house through technology rather than
outsourcing. For instance, instead of outsourcing payroll, enable your
staff to handle it easily through the appropriate application.
Expand market influence. Use built-in analytics
that provide timely, accurate, and actionable information to help you
identify needs (such as additional capital) and opportunities (such as
new markets). Having this information enables you to take action in a
timely fashion and mitigate risks.
REDUCE OVER HEAD.
To maintain profitability in the face of slowing or stagnant sales,
you need to trim expenses and find other ways to reduce the drain on
revenues.
Cut expenses. Evaluate all current expenses to see
where cuts can be made. Pay special attention to energy consumption
because energy conservation can provide multiple benefits"it saves
energy costs and helps the environment. Limit travel to necessary trips
and, instead, use conferencing technology to bring parties together on
a less costly basis. Where appropriate, invest in solar or alternative
energy"it saves energy costs (the payback period may be shorter than
you think) and can reap substantial tax breaks (federal and/or state
tax credits, exemption from state property taxes, etc.).
Cut inventory. Maintaining inventory costs you
money in warehousing, tying up financing, and paying state taxes. Look
for ways to move merchandise through sales or by giving inventory to
charity. Charitable donations can create tax deductions as well as
generate goodwill for your company.
Get rid of customers that produce low margins. Some
customers may be too costly to service; produce only small margins; or
create big headaches. Now is the time to cut them loose.
Use independent contractors. In a down economy,
when you need to get things done but don't want to commit to a
long-term employer-employee relationship, independent contractors can
fill the need (e.g., to complete a special project). When feasible,
it's less costly to use independent contractors instead of full-time
employees. . Doing this will save on needed space to accommodate
workers and avoid costly payroll taxes. But don't invite IRS problems
by mis-classifying your workers, which means arbitrarily labeling
workers as independent contractors even though they are really
employees. If you have the ability to dictate when, where, and how the
work gets done, the workers are employees and should be treated as such.
WATCH YOUR CASH FLOW
Slow-paying customers in a bad economy can have a domino effect on you by adversely affecting your cash flow.
Maintain your credit rating. The key to having
access to capital is a good credit rating and, to have a good one, you
need to pay your bills on time. This can be done by carefully
monitoring your cash flow and using existing credit options wisely.
Step up collection activities. Your customers may
be experiencing their own cash flow challenges, which can delay payment
to you. Be ready for this possibility by reviewing and revising your
invoicing and collections policies. For instance, instead of billing
all customers at the end of the month, bill each one as work is
completed or goods are shipped. Send invoices electronically and
follow-up on a schedule that will help encourage payment.
USE YOUR SLOW TIME WISELY.
The slow economy means down time for many businesses.
Turn your down time into productive activities that will help you get
through any current difficulties and position the company for a robust
economy that is sure to come.
Review your business and marketing plans.
Strategies you had mapped out for your business may not be appropriate
in this difficult economy. For instance, you may have initially
budgeted for an expensive marketing program, but given your higher
energy costs and other expenses that are eating into your bottom line,
you may now want to use less costly marketing strategies. Maybe you
want to put more emphasis on social-media marketing (e.g., blogging or
hosting customer reviews of your products or services), which can cost
little or nothing but can be highly effective. For instance,
participating in MyVenturepad (www.myventurepad.com) can give your
company visibility by enabling you to post your blogs and/or comment on
the blogs of others.
Reach out to customers. Take the time now to find out what's working and what
isn't. Use customer surveys or questionnaires, which can easily (and inexpensively)
be sent to your customer database via e-mail. Provide an incentive for responses,
such as a nominal gift or a discount on future purchases.
Maintain employee morale. Employees can surely see when sales are slow and their
opportunity for wage increases and bonuses are slim. Find no- or low-cost ways to
reward employees, such as giving time off or allowing for flexible schedules. If layoffs
become necessary, pay special attention to keeping up the morale of remaining staff;
staff anxiety can lead to bad decisions that will hurt your company. If leadership
stays calm and demonstrates rational decision-making, staff will follow suit.
Explore new opportunities. Use the time you have now to look into new business
opportunities. This can mean bringing on new lines or creating new partnering
arrangements to improve efficiencies.
CONCLUSION
No matter how bad the economy may seem now, there is light at the end of the
tunnel"recessions and economic slowdowns do not last forever. Good times will
return. Be prepared to hit the ground running when they do by taking action now.
ABOUT BARBARA WELTMAN
Barbara Weltman is a respected attorney and a nationally recognized small
business authority. She is the author of several bestselling books on taxes
and finance. And her newsletter, Barbara Weltman's Big Ideas for Small
Business, is considered the source for timely information on small-business
issues and trends. Ms. Weltman has been featured in The Wall Street
Journal and on Inc.com, Bloomberg TV, CNN, and CNBC, and is a frequent
speaker at eBAY Live.