by William Bell

Created on: May 02, 2008   Last Updated: May 08, 2008

Many small business owners face challenges everyday. Those challenges multiply during economic downturns. The current belt-tightening precipitated by the slowing housing market creates ripples throughout the economy.

Increasing foreclosures depress bank reserves. Lenders impose more stringent guidelines for loans. Mortgage companies see their cash flows drying up. Realtors work harder and longer to get loans approved, lengthening the time it takes to receive commissions.

Related services and products that are the natural outgrowth of new home purchases creep along at a turtle's pace. Consumers, taking their cues from the media hear that the economy is in a downturn. In turn, they tighten their grip on discretionary cash and refuse to make new purchases until it is deemed safe. Anxiety about job security looms in every community.

The small business owner, laden with operational expenses has very little economic flexibility. Profit margins fall and day to day survival is nerve-wracking. What can they do?

Get solid financial advice. While many small business owners consider it a luxury to afford a business consultant, this can be a very important step. It allows the opportunity for an objective third party to analyze and suggest the implementation of cost-saving and money making strategic planning. This service doesn't have to cost money. Check in your communities for organizations like SCORE and others who provide assistance for free.

Cut back on expenses. Many problems small business owners face result from their own extravagance. When cash flows are good during an economic boom, short-sighted business owners may spend unnecessarily. The assumption is made that things are going well today, thus they will always be good.

Economies, like the weather are cyclical. Things will change from better to good, from good to bad, and from bad to worst and then return ever so slowly. If small business owners exercised the vigilance required in the worst economies, they would always be prepared. They should always have a "lean and mean," "worst case scenario" built into their plans and ensure they can survive it.

One of the best offensive and defensive strategies for any business, small or large, is an effective marketing campaign. This is not the same as advertising, but a well thought out, well executed, results-oriented marketing campaign. Most companies failure can be traced to their failure to execute a good marketing program. It's not always the company with the best products or service that survives but the company that knows how to execute effective marketing strategies.

Secondly, increase sales to existing customers. Sometimes the answers to many of the problems companies face is right under their noses. It's the often overlooked pot of gold in their existing customer base.

Many of them have a short-sighted mentality. Some only sell to these customers once. But, as commissions are generally paid upfront, new customer acquisition is very costly. It's the back-end sales and repeat business that promotes health to the bottom line, creating residual income and cash flow. Thus, small business owners should look for ways to create services and products for repeat sales while maintaining contact with their existing customers with whom they have already built trust.

Finally, be good stewards by managing time and resources. Keeping track of time, especially productive time in acquiring and servicing customers increases profits and the stability of the business.

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