NASE Blogs

Are You Up to the Challenge?

Tuesday, January 04, 2011

From what we are hearing from NASE members across the country 2011 appears to be shaping up to be a better year than 2010 ... but our advice is not to let your guard down. Take it from lessons learned and prepare for the lean times and if they don’t come, you’ll just be that much better off. Other words, “Plan for the worst and hope for the best”.

It’s easy for a business to succeed when customers are knocking down your doors. The real challenge that separates entrepreneurs from those who do well in spite of themselves is when there are more people wanting to be paid than there are customers’ dollars coming in the door!

For the majority of small and micro businesses across the country we have felt the effect of the economy in no uncertain terms. And for those of us who are still around, we have learned some valuable lessons on how to survive. While it isn’t pleasant to think about falling on hard times, every business will experience some degree of cash-flow crunch from time-to-time.

Regardless of whether the crunch is a few days sweating out “the check is in the mail” or months of sleepless nights. If you’re not prepared, even a minor cash flow hiccup could result in a terminal problem. Sadly, many business owners don’t see the signs until it’s too late and then don’t have a plan to recover ... and a lot of them didn’t make it through 2009 and 2010.

For those of you who learned your lesson, here are a few reminders of keeping the wolves from your doors. For those of you lucky enough to wonder what economy downturn I am talking about ... don’t get too brave and think that you can’t be the next victim. Here are some good business ideas to use in good times as well as bad. Make them part of your routine management and you might never have to worry about when the next cash crunch is going to hit.



Don't wait until you need them just to survive. Build on customer loyalty now.

1. Develop a database of customer names and addresses.

2. Send greeting letters or emails several times a year and tell customers how much you appreciate their business with special sales or promotions exclusively for them.

3. Make sure employees practice “customer satisfaction”. No customer should ever leave your business dissatisfied.

4. Reward customers for coming back with incentive programs. Gain customer loyalty when times are good and they’ll be there when times are not so good.


When cash flow takes a hiatus one of the first cuts is usually payroll. Be careful ... if you cut service levels too much you might cut services that will cost you customers. Make sure payroll cuts are affordable and customer satisfaction isn’t effected.

1. Review every employee job description and function to find: 1) Jobs that can be incorporated into others; such as an administrative assistant also acting as a receptionist. 2) Employees who are the most diversified and dependable to the business.

2. Put dollar values on each job function based on wages and benefits the business pays (FICA, Workers Comp, Insurance, Etc.) and compare the costs against what that position produces in revenues to the business.

Cash Reserves

The best time to find money is when you don't need it.

1. Have cash reserves, or the ability to get cash, equal to three to six months of operating expenses.

2. Talk with your bank or other lenders about opening a line of credit or extending one you already have.

3. If you can’t get a line of credit but your personal credit is good, get several credit cards that offer cash advances.


If you sell goods and a primary vendor delays delivery, you’re sunk unless you can replace those goods from someone else.

1. Develop a list of secondary vendors who can supply you in case a primary supplier can not ... or will not.

2. Give some business to secondary vendors. If you haven't done any business with them they may not be willing to work with you when you need them.

3. Develop a list of secondary products. If you can’t get primary products you may be able to offer other options. An example might be if you sell women’s clothing, have a back up to replace some clothing with other accessories like costume jewelry and sportswear.

Credit Policies

If you extend credit to customers make sure you follow a good policy. Don’t get in the habit of extending credit that may end up a bad debt.

1. Review customers you normally extend credit to and rate their payment history ... excellent, good, marginal, or poor.

2. If you need to bolster cash flow, only extend credit to customers with good payment histories ... all others go C.O.D.

3. If you need fast cash offer credit customers a discount of 5% if they will pay in advance.

4. Act fast on overdue accounts. The older an account gets, the less chance you’ll collect it.

5. Be cautious of customers who suddenly start complaining about you dunning them. The louder and more threatening they are, the higher the chances they will stiff you.


If business slows down you may need to make some marketing adjustments. Don’t cut marketing for the sake of saving money. When business is slow you may need to spend more marketing dollars to keep the business afloat.

1. Continuously track marketing results based on revenues (and profits) generated 1) List every ad or promotion done over the past 6 months and the profit they produced. 2) Match the sales produced against the costs of each program.

2. If you need advertising but don’t have the cash to pay for it talk to advertisers about a trade out for your products or services.


When times get tough competition can get cut throat. Be prepared to counter any effects that a combination of bad times and competition may have on the business.

1. Shop competitors to determine if they are feeling the effects of a downturn. Consider their customer activity, pricing, and employee attitudes.

2. Look for weaknesses in their operations and then look at your business. Do you suffer from the same problems? If so fix them.

3. Look at strengths. Are they doing something unique that you can copy?

Operating Expenses

When money is tight every dollar counts and controlling the outflow can be the difference between survival and closing your doors!

1. Look at every expense for the past 6 months. Look for expenses that increased for no particular reason and get them back into line.

2. Ask employees for ideas on how to cut expenses. They are probably more aware of areas that can produce savings than you are. Without their support you could be fighting a loosing battle.


If you do become a victim of bad times the more prepared you are, the better chance you’ll weather a storm. Few businesses can survive when owners spend their time fighting fires and ... just because you plan once doesn't mean you don’t have to adjust for changing conditions every 6 months or so.

Being prepared for the worst of times may not be the most pleasant thought, but being ready just in case could mean the difference between survival and ... well you know ... that other word!


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