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Most businesses have been in some way affected by the current downturn in the economy, and small businesses that provide discretionary products and services which are marketed directly to the consumer have been under particular pressure. But as a small business owner it is important to accept that there are cycles in the economy and that one of the keys to running a successful business is having the staying power to weather down cycles.
Similar to large corporations, small business owners should be constantly reassessing their business models in light of changing economic, technological, and social changes. Staying focused on the core business that provides future stability and profitability is a key element. Often, business owners find themselves with multiple products and/or services without a clear understanding of the profitability of each. Having that information on hand will help you to make better decisions, perhaps even leading to a determination that one or many of those nonessential products or services should be abandoned. This would provide cash savings or potentially free up those resources, be they assets or people, to be put to more profitable use.
In certain circumstances, assets can be sold to generate additional working capital for the core business.
At a minimum, business owners who document their evaluation process create another tool that provides further credibility for them when shared with lenders and investors down the road.
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.
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