The economy looks pretty grim. It almost seems that every news article about the economy has some dismal statistics that allude to the continued recession we’re all experiencing. For those of us who thought we’d seen the worst of it and had hoped this past summer would have brought the first signs of a recovery, well, we were rudely jarred by the discouraging economic numbers that were released throughout the summer: unemployment remains above 9% nationally with many states still experiencing unemployment above 10% (10 states plus DC and Puerto Rico), manufacturing productivity is teetering on contraction, and consumer confidence is not seeing any significant improvement.
So, is it time to finally give up on the American economy? Or are there signs that maybe things are going to get better in the near future? As bad as things may seem right now, retail forecasters predict the upcoming holiday season to be its best in five years. A recent survey revealed that 41% of small businesses expect to hire new employees in the near future. Plus, the 2012 elections are a year away which means the federal government is going to do something to help out businesses (or at least that should be the assumption).
Either way, small businesses will have to figure out a way to thrive no matter what the condition of the economy is now or in the future. Whether you’re about to start a business or whether you’ve weathered the storm thus far, your business can grow with prudent measures. So here’s some reminders during these difficult times:
1. Remember, America is still rich.
Even though Americans may not be spending as much as before, they’re still spending over $14 trillion a year. That’s a lot of money that can be made out there. With most Americans having access to the Internet, any small business can reach the vast resources we, Americans, like to dole out.
2. Avoid premature scaling.
Most startups that fail don’t do the wrong things. They just simply do those things at the wrong time. The most important thing for a startup is not a good product, but a market for that product. Often, startups fall into the trap of thinking that the product will bring the market (i.e. my product is so good, everybody will want it), but this is not how business works. This premature scaling trap leads the business to spend money on advertising, personnel, and improving the product for a market that the business hasn’t fully developed. Without a well defined market, all that money ends up being wasted and by the time that money is spent, there’s no going back. Be patient enough to develop a viable market for your product.
3. Watch your cash flow.
As the economy remains stagnant, cash becomes tighter for not just you, but everyone. Watch out for any change in payment behaviour from your customers and don’t be negligent in collecting outstanding balances from customers. Target these customers early and work out a payment plan with them. If these customers aren’t paying you, then that’ll probably mean they’re not paying other people and you don’t want to be last in line. Negotiate longer terms with your vendors so that you’ll have more cash in hand for as long as possible. Watch your inventory to make sure your inventory is not outpacing your sales.
4. Market wisely.
When times get tough, businesses tend to do the kneejerk reaction and stop spending. That is not a good idea. Rather than stopping altogether, small businesses need to simply spend more wisely, particularly in marketing. Marketing is essential in any economic environment and the best businesses find ways to market to more people during difficult times. Find the marketing schemes that work best for your business and start devoting more of your spending to those successful marketing schemes, and expect the big payoff when people begin to spend again.
5. Be flexible with your products/service.
If people aren’t buying your products, then see if they’re willing to lease your products. If people say your service is too expensive, then create a tier system that allows certain customers to pay little with the option to have add-ons. Offer specials that’ll get the customers to at least enter the business. Remember, business is not only selling a product/service, but it’s ultimately developing a relationship that people will want more of.
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