“No business is immune to the fickle and unpredictable nature of a competitive marketplace,” says speaker and strategic consultant, Tom Panaggio, author of The Risk Advantage: Embracing the Entrepreneur’s Unexpected Edge. “All business climates are made up of a series of connected cycles, both positive and negative, that business leaders must accept as a risk and a cost for the opportunity to follow their entrepreneurial dreams.”
Tom Wheelwright agrees. “I have never seen any business that didn’t have ups and downs,” says the author of Tax-Free Wealth: How to Build Massive Wealth by Permanently Lowering Your Taxes and CEO of ProVision Wealth Strategists. “The stock market and economy in general affect all small businesses, because it causes customers to either hold on to their money or spend.”
While the overall economy may create some cyclical exposure for small businesses, most owners may be more in control of their destinies than they think, says De’Andre Salter, CEO of Professional Risk Solutions and author of Seven Wealth Building Secrets: Your Guide to Money and Meaning.
“Even in down markets, people spend money and buy goods and services,” Salter says. “Better managed and capitalized businesses are the ones that prosper during the downturns. It’s possible for small-business owners to come out ahead during downturns if they prepare for the ride. For instance, I don’t like rollercoasters, especially those with really big hills and drops, but if I know I’m visiting an amusement park, I research the drop, its height, speed, etc., so I’m prepared for the trauma that will inevitably come my way.”
In order to survive and thrive no matter the economic times, there are several things you can do to help keep your small business on course.
Always Keep Marketing
“Marketing is often the first budget that gets cut during a downturn, but it should be the last,” Panaggio says. “Cutting your marketing and sales is like turning off your engine in the middle of a car race. Let your competitors cut their marketing budgets and capitalize on their fear.”
When times are bad, don’t give in to the fear and turn off the marketing engine to save money, agrees integrated marketing expert Bonnie Harris of Wax Marketing, Inc. “Do whatever it takes to create as many income streams as possible, while getting serious in terms of ROI. Pursue less expensive marketing channels like online and content marketing and social media.”
Remain Innovative
“Never stop looking for ways to implement change, especially during tough times,” Panaggio says. “When things get rough, weak competitors will go into hibernation, and this is when creative business leaders make their moves. A couple percentage points of market share gained during a slowdown can pay huge dividends when the cycle turns around.”
Get closer to your customers in order to offer them products and services that best serve their needs, Salter advises. “When things are bad for the owner, it may be worse for the customer. So you must find creative ways to engage customers at a new level; understand their interests and help them solve life problems.”
Do More with Less
Small-business owners should become experts at survival tactics, Salter notes. “If you have to lay off employees, then keep the best, train them more, and pay them more to do more. The customer experience cannot suffer because the owner has fewer resources.”
Scaling back before you’ve lost too much is critical, Wheelwright adds. “Avoid throwing good money after bad. Business owners tend to try too hard and too long to keep employees and the business running as it was. Instead, regroup and look at how to ride out the storm. Laying off some longtime employees is better than going bankrupt, which doesn’t help anyone.”
Shave Taxes
Rather than inventory or employees, taxes may be the single biggest cost to a small business, Wheelwright notes. “We pay so much attention to production and employees that we often forget taxes are taking 50 percent or more of the net income from most small businesses. A simple plan of action from a good tax advisor can reduce taxes by 10 to 40 percent in a very short period of time. The extra cash flow from reduced taxes can be used for marketing, expansion and a well-deserved vacation for the owner.”
Maximize the Highs
When the good times come, and they will, use those opportunities to prepare for the long haul and focus on growing your business. “Be strategic and proactive and use the wave to look for ways to reduce expenses and increase profit margins,” says business optimization strategist Darnyelle Jervey, CEO of Incredible One Enterprises. “By running your business a minimum of 90 days ahead strategically, you’ll likely be proactive versus reactive to unseen circumstances.”
Whatever you do, don’t convince yourself that the boon is here to stay and spend all your cash. “All small businesses should maintain a cash reserve of three to six months of expenses at all times,” Wheelwright says. “A strong line of credit can also take the pressure off when the business has its downs.”
Be Straightforward
“Don’t deceive your employees, especially when times are difficult,” Panaggio says. “Employees are perceptive. Communicate the state of the company on a regular basis. When advised and included in the process of implementing change during down markets, employees become understanding and helpful. In the same respect, when things are good, reward them. Then they’ll stand by you and work extra hard through any market fluctuations.”
For more tips on how to help ease your way through tax season, access our exclusive guide, It’s Tax Time: A Business Owner’s Survival Guide.
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The information contained in this article is for generalized informational and educational purposes only and is not designed to substitute for, or replace, a professional opinion about any particular business or situation or judgment about the risks or appropriateness of any financial or business strategy or approach for any specific business or situation. THIS ARTICLE IS NOT A SUBSTITUTE FOR PROFESSIONAL ADVICE. The views and opinions expressed in authored articles on OPEN Forum represent the opinion of their author and do not necessarily represent the views, opinions and/or judgments of American Express Company or any of its affiliates, subsidiaries or divisions (including, without limitation, American Express OPEN). American Express makes no representation as to, and is not responsible for, the accuracy, timeliness, completeness or reliability of any opinion, advice or statement made in this article.
A version of this article was originally published on August 28, 2015.
