It is challenging to keep a small company afloat during tough economic times. No playbook can be followed to weather the storms and turn the ship around. Each small business is unique, with its risks and rewards.
It is impossible to copy a company’s turnaround strategy. There are still some general strategies that business owners can use to stop taking on more water and start rescuing themselves.
Takeaways from the Key Notes
Keeping a small company afloat during difficult times can be challenging, but paying attention to the details can ensure a business’s survival.
There is no one-size-fits-all survival guide for small businesses. Each has its unique risks and rewards.
For small business owners, some helpful advice includes: looking at the bigger picture, assessing the employees, ensuring the business has easy access to cash, and sweating over the little things.
Auditing the most critical employee, you, as a small business owner, is essential.
Business owners may have to put their survival before profits under challenging times.
Take a look at the big picture
The tendency is for people to tackle the most immediate and apparent problems without hesitation. It’s understandable and might be a good idea in certain situations. It is essential to take a step back to assess what’s working and what needs to be changed. This is an opportunity to understand the scope and size of problems and your business models.
Imagine, for example, that a small business owner finds out that two employees need to correct inventory management, leading to certain supplies being over- or understocked. It may be tempting to fire these employees initially, but it would be better to check whether the manager who hired and supervised them correctly trained them.
The manager could be fired if they are at fault, but that may not be the best solution. You can retain a manager whose client relationships have brought in repeat business or substantial revenue. It may be better to retrain the manager than terminate them.
The owner can reduce or eliminate the chances of recurrence by examining the employees’ strengths and weaknesses from a bottom-up perspective. This will also help avoid a change that could negatively impact future sales.
Use the same lens to analyze how your product or services fit into the market today, how the current economic crisis has affected you and your suppliers, and all other aspects of your business. You must know how your business model fits into the current market and what different scenarios in the future could mean for it.
Stock, Your Staff
Payroll can be one of the most significant expenses for a small business owner, so it makes sense to make sure that money is spent wisely. It may be necessary to review the staff, both when there is a problem and in the course of regular business. This will ensure that the right people are hired and performing their duties effectively.
Small business owners and large corporations are often penny-wise and pound-foolish when they hire the lowest-priced workers. Often, the productivity of these workers is suspect. Especially during times of crisis, it makes sense to hire a worker that costs 20% more but performs 40% better than the average worker. Businesses can increase their efficiency by constantly interviewing and seeking out new candidates.
Low salaries may be counterproductive if the result is a lack of productivity.
Start Sweating Small Stuff
Looking at the big picture is essential, but small-business owners should pay attention to minor details that can hurt their business. Small problems can have a significant impact on a business’s bottom line. Examples include a large tree blocking the view of the business or its signage.
Analyzing and considering the many factors that drive customers to your door can help identify some issues. It may be beneficial to go through your quarterly expenditures line-by-line. Owners should look for something other than one-time charges since these are most likely needed. Instead, They should look for small, seemingly innocent items draining their accounts.
For example, if you order office supplies incorrectly, they can quickly become uncontrollable. If your supplier raises the price of their products, look for a lower-priced supplier.
Quality is not to be compromised
In tough times, it is essential to keep costs under control. Owners must stay at the forefront and encourage employees to embrace changes. Be careful not to sacrifice quality when you make these changes.
Businesses that want to increase their profit margins must be careful about making drastic changes to the key components. If a pizzeria experiences a dry spell, the owner may increase margins by buying cheaper cheese and sauce ingredients. The strategy may backfire if the customers are unsatisfied with the pizza’s taste and the sales drop. Cutting costs and making other changes that maintain the final product is essential. You could cut the cost of paper napkins or takeout boxes instead.
What are the effects of a bad economy on business?
A bad economy can harm a business on many levels. Interest rate changes could impact a business’s capacity to borrow funds. Saving money during economic uncertainty may mean people spend less, and the company will have fewer clients. If the market drops enough, some sectors could come to a standstill.
How do you survive hard times in business?
When times are tough, companies can reduce costs. It may be necessary to lay off employees who are not essential or for executives to take a temporary salary cut. Companies that make physical products can switch suppliers, while others might opt for less expensive materials. Businesses can issue equity or add to their debt. However, these can be risky options depending on how the actions are carried out and the impact on the business in the long term.
The Bottom Line
Keeping a calm, collected head when times get tough for your small company is more important than ever. If you are stressed out or buried in small details, you may need to find a more relaxed way to keep your business going. Staying focused on the big picture is the most important thing in times of difficulty.