No one likes to think about a downturn in business. But if it happens, the sooner you see it coming, the better prepared you will be.
Finances: Prepare monthly financial statements and look for problems before they arrive and wreak havoc.
Expenses: There are only two ways to improve the finances — increase income or decrease expenses. Increasing income takes time, but decreasing expenses can be immediate. Look for specific expenses you can cut if sales slow down.
Customers: Don’t wait until it’s too late to build customer loyalty. Develop a customer-loyalty program that will help see you through hard times.
Employees: Employees are one of your most important assets, and good employees are difficult and expensive to replace. Before you make any staff cuts, be sure customer service and production won’t suffer.
Marketing: It’s tempting to cut marketing costs when things get tight. But if sales are slow, you may need to actually increase marketing instead of cutting back.
Inventory: While you need product to make sales, don’t let excess inventory create cash-flow problems.
Cash reserves: Banks aren’t interested in lending money when you’re experiencing difficulty, so make arrangements during the good times to protect yourself with a line of credit.
Credit policies: If you extend credit to customers, make sure you have a sound policy and follow it. Don’t let customer credit become bad debt that burdens your finances.
ShopTalk 800® Business Consultant
National Association for the Self-Employed
Want to improve the way you run your business? Entrepreneurs, academics, and consultants from diverse industries offer practical advice on a variety of topics each business day.
To submit a tip for consideration, first check our archive of previous tips to make sure you're not repeating a tip someone has already contributed. Then send the tip to Small Business channel contributor Michelle Dammon Loyalka. Because of the volume of material she receives, she may not respond to each individual.