Monday, December 7, 2009
2010 Small Business Tips: You Have Weathered The Storm; Now What?
For many small business owners, 2009 was a year of reckoning. We experienced the worst economic meltdown since the Great Depression and many industry pundits and economists are torn as to whether or not we are actually experiencing a recovery.
Regardless of what the economists are saying, small businesses need to operate with a completely new mindset – recovery or not. 2009 was all about survival and if approached correctly, 2010 can potentially be the year for small business to go beyond survival to prosperity mode.
So, small businesses have weathered the storm – so to speak. So, what to do now? Below are some key tips and lessons learned that will help speed the recovery process for small business owners.
Lesson Learned #1: Make Deep Cuts When Businesses Future is Uncertain. The key to business survival is to stay profitable. So, how does one do this? Simply put; you may need to lay off more employees to stabilize the business. It does no one any good to keep employees around if the company is then at risk months later. Companies tend to do the minimum amount of layoffs of employees but then put themselves and remaining employees at more risk shortly thereafter.
Lesson Learned #2: Take More Money than Necessary. Businesses tend to raise the minimum amount of equity or debt necessary based on a financial model that is usually not conservative. Before the Great Recession, companies should have taken as much money as possible during the period when capital was being easily distributed.
Lesson Learned #3: Get to Profitability As Soon As Possible. While venture-backed fund can certainly be the lifeblood for a start up – it is often like having golden handcuffs. These companies are at the mercy of the VCs. Their survival is solely dependent upon the next round of financing. There are many reasons for a VC to pull the plug and it may have nothing to do with the business viability. It could be caused by the VC’s own capital needs or the need to shut down the fund and start another fund. The key to not being dependent on a VC or the next round of funding is to have a self-sustained business.
Lesson Learned #4: Get The Upper Hand with a SBA Loan
Thanks to the American Recovery and Reinvestment Act, the Small Business Administration (SBA) is armed with $730 million for lending and investment programs. The maximum loan sizes have also been increased to $5 million (from $2 million). These loans are also reasonable in nature and achievable to obtain – take advantage of this.
Lesson Learned #5: Spend Money Now on Advertising
Now is the right time to spend money now of advertising for 2010. Simply put; the golden rule of spending money on advertising is a recession still applies. There is also a tax savings for 2009 for most small companies if the money is spent now (even if it is for advertising in 2010).
So, the big question is; what is your small business doing to make 2010 the year of business prosperity?