By Sandra Taylor-Sawyer, Ed.D.: Guest columnist
Another hike in gas prices and the cost of other goods rising causes business owners to maintain their finances and plan for the future in order to survive. J. Roy Miller State Director of the New Mexico Small Business Development Center and a Clovis son, recently discussed the opportunities small-business owners can consider during the time of rising costs.
Mr. Miller elaborated on the opportunities that an economic crisis presents — an opportunity to determine where costs can be reduced and revenue collected. He stated that to begin the process all areas of the business should be reviewed closely; operating costs are the starting point. Is the office space and equipment at capacity? If not, consider subleasing the excess to generate income.
Small expenses become large as a group. Electric cost can be reduced by turning off the air conditioning during non-operating hours or setting the thermostat higher. A study conducted by Alan Hedge of Cornell University concluded employees’ production level decreases in a cold environment. Save on messenger service cost by faxing certain documents. Send proposals, invoices, and other correspondence by email. Consider a four-day workweek as long as it does not reduce profits.
In order to identify efficiencies involve employees by rewarding staff for cost-saving ideas. Building team spirit and lifting morale by implementing an employee-incentive program can generate savings that are more than the money spent on rewards.
Consider increasing insurance deductibles in order to lower insurance premiums. Renegotiate lease agreements and make interest-only payments to increase cash. Cash flow must be monitored closely. Keep customer account balances as low as possible by not extending full credit, contact customers immediately when the collection period expires, and settle billing disputes promptly. Do not shy away from imposing penalties or interest on overdue accounts. This is the time to tighten credit polices for ALL customers.
Pull out the business plan and review the company’s strategy. Discover new markets based on changes in demand, find a niche product, or consider bundling products and services to offer a more attractive package. Large companies sometimes discontinue products or services that small businesses can innovate more quickly. Review the competition. How are they faring?
Once these suggestions and others have been considered, consult with an adviser for other ideas. Discuss ways to reduce taxes with the CPA, on a regular basis meet with an informal advisory board to brainstorm about further business savings, and always inform your banker and creditor of the good and bad times by sending them copies of interim financial statements.
A recession challenges the savvy entrepreneur to find opportunities that most likely will be overlooked during the good times. See this time as a challenging opportunity to move the business forward.
Sandra Taylor-Sawyer is director of the Small Business Development Center at Clovis Community College. Call the center at 769-4136 or visit www.nmsbdc.org/clovis