Although some economists claim the recession is over, it certainly doesn’t feel like it for most entrepreneurs. Despite signs of a rebound, a number of businesses must fight to keep the lights on.
Recent statistics promise it will be a bumpy ride to recovery. Corporate clients and consumers, for the most part, continue to hoard cash. Credit is expected to remain tighter than a miser’s wallet. In fact, the Federal Reserve Board’s recent survey of lending practices of U.S. commercial banks found that 35% of these institutions have tightened standards on small business loans. The SBA reported that through Aug. 14, only 36,055 loans guaranteed through its 7(a) program were approved this fiscal year–a 43% decline from the same period a year earlier. As a result, the body count has mounted: according to the American Bankruptcy Institute, more than 30,000 companies filed for bankruptcy protection during the first half of 2009, a 64% rise from the same period a year ago.
I didn’t paint what may appear to be a bleak picture so you would call it quits. I just don’t believe in sugarcoating tough situations. Since last year, I have been bombarded by e-mails, phone calls, and drive-by chats from young entrepreneurs who seek the magic formula for survival. First, I tell them that no such blueprint exists. Then I let them know they’re not alone. Believe me, I know every twist and turn on the road you’re traveling. Black Enterprise has not been immune to today’s challenges. But I decided to meet them head on. And you should, too.
Yes, I believe the economic recovery will arrive soon but it will take a while before many of us reap its benefits. Now is the time to position yourself for the future. Take stock of your company and operate in a mode that will not only preserve the business but will also burnish your reputation–your reputation represents your most valuable asset.
Be honest. It may sound simple but it’s the best way to conduct business. When dealing with partners, associates, employees, and vendors, share with them pertinent information–even though it may be uncomfortable. When be was forced to make across-the-board budget cuts, I clearly communicated the financial state of the company with every employee from the receptionist to our senior management team. Not surprisingly, they understood. Just as important, they all played a role in controlling costs.
Don’t hide from creditors, even though you may be tempted to. Avoiding the phone is no way to run your business or your life. They will eventually find you, and you’ll probably wind up losing a service that’s critical to the operation of your business. Instead, talk to them and work out a new timetable for paying your bills. Manage, even lower, expectations. If you tell a creditor you’re going to pay by a certain date, stay true to your word. Instruct and monitor your staff so that they are honoring such agreements. Don’t let your rep be sullied by others’ actions.
Review all contracts. The current environment offers
leverage to correct ill-advised decisions you may have made in the past. A number of business owners enter into agreements with terms that may hobble their enterprises in the long run. Evaluate whether you need to keep certain services as well as renegotiate terms in your favor.Continue to maintain and build relationships while managing through hard times. Contact business mentors for advice. Visit clients who may be facing the same struggles. Find associations and organizations that can help you identify resources and assistance within your industry. Use these contacts to produce contracts.
I strongly believe that if you stick with your core values during these tough times, it will serve you well when the economy rebounds. So while others debate, take action now.