Do you have a small business that's been affected by the crunch? Here are five things you can do to keep your firm afloat.
If you run a small business, you probably heaved a sigh of relief at this week's 1.5% base rate cut. According to the Federation of Small Businesses, the cut amounts to a saving for small firms of around £750 million on loans and overdrafts.
Of course, this will only happen if lenders actually pass on the full rate cut - something they've been notoriously bad at doing in the past.
And many banks - having tucked the government's £500 billion support package firmly under their belts - are now being shamefully intransigent when it comes to offering credit to small firms in need.
So, in the midst of all the economic gloom, what can small businesses do to save themselves? And what will make the difference between the firms that survive and those that don't?
Here, I've outlined six action points that should help keep your business afloat.
1. Find the best business bank account
First of all, make sure you have the best business bank account you can get. The charges levied by some can really mount up, and now is definitely not the time to be spending more than you need to.
Every small business will have its own unique set of requirements, but factors to consider when you're shopping around include:
- Does the account offer free day-to-day banking - and how long will this last?
- What interest rate will you get when in credit?
- Is there a monthly charge for the account?
- Are there minimum balance and maximum monthly transaction limits?
- How can you access and manage the account (in branch/phone/internet)?
- What is your overdraft facility and how much will it cost you?
You can use the British Bankers' Association Business Account Finder (provided by Moneyfacts) to find the right business bank account for you.
2. Optimise cashflow
If you're having trouble getting payment from clients, tighten up your payment terms.
For example, make it clear that interest will be charged at a certain rate if invoices are not paid within 30 days.
Also try to set up ways of bringing money in when you're not working (passive income streams). For example, you could earn money by displaying relevant Google ads on your company website, using Google AdSense.
If you have a serious problem with clients not paying you, it may also be worth joining the Federation of Small Businesses so you can take advantage of the legal services it provides to help you chase the money you're owed.
3. The right kind of advertising
If you're struggling financially, you might be tempted to stop spending on advertising completely. In fact, you may be better off re-targeting your efforts.
- First and foremost, make sure you understand exactly who your customers are and target them specifically. Don't rely on luck - a scattergun approach could cost an awful lot and produce very little return. So think about your where your customers live, what they read, what interests them, how old they are and whether they tend to be men or women.
- Once you know all this, you can decide on what advertising medium will be most effective in actually reaching them. For example, think about whether direct marketing (like leaflet drops) or email contact is likely to appeal to them most - or annoy them the least!
- If you haven't already, make the internet your friend. These days, most people use it as their first port of call when tracking down shops, goods and services, so if you don't have an effective web presence you're at an enormous disadvantage. Get to grips with the basics of web marketing. If you're not web-savvy, this could be a bit daunting, but try to get your head around what drives web traffic and how to use SEO (search engine optimisation) techniques. In a nutshell, these are actions that don't cost much to implement but could hugely increase the number of people that visit your company's website.
If you haven't already, visit your local Business Link. These service provides valuable free advice and support for small businesses, including many courses and workshops.
4. Adapt to conditions
The most successful businesses are usually those that evolve to keep pace with their surroundings. Think about how yours can develop and re-focus to accommodate people's changing needs in the current economic climate.
For example, can you target sectors that are `recession-resistant'? Think about the requirements people will always have, however stretched they are financially.
Also find out which end of your market is doing well, then focus all your energies on it. In many sectors it may be best to target either very high-end OR budget buyers, as demand for middle-range goods and services rapidly falls away.
5. Make the most of the downturn
To put it bluntly, competitors' failed businesses present you with an opportunity. If you're canny - and particularly if the service you provide is essential - you could soon corner a far bigger market share.
In even the worst economic climate, there are always some customers who keep spending. You've got to make sure they can find you if and when their previous supplier of goods or services goes under.
So, if you possibly can, keep spending on carefully-thought-out, well-targeted marketing. You may be able to negotiate better rates for your adverts, because as other companies stop spending in this area, advertisers will be increasingly desperate to keep your business.
In other words, `if you can keep your head when all about you are losing theirs'.you may even be able to make the recession work for you.
Good luck!
More: Cut Your Small Business Costs In Five Simple Steps | The Five Essential Rules Of Business
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