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With a little discipline, good organization, and planning, small businesses can safely survive an economic downturn. Here are a few suggestions:

1. Stay in touch with your cash flow. Focus on the areas where your cash is being held up, such as inventory, equipment purchases, and accounts receivable. By doing so, you will be in a position to improve your current cash flow and predict a future shortfall.

2. Consolidate or restructure your debts. Bring together debt from loans, credit cards, or any other lines of credit. Negotiate with creditors for a longer repayment period.

3. Look for ways to cut costs. You could, for example, cut down on old and obsolete inventory, and save on paper and postage through the direct deposit of payroll.

4. Streamline your billing system. You need to on top of your customer receivables. There are several accounting software programs on the market, such as QuickBooks, that can help you keep track of who has paid and automatically alert you when bills are overdue.

5. Tighten your credit policy. Set stricter terms and conditions for receiving credit. You could require a down payment at purchase, shorten the payment period, and only extend credit to select customers.

6. Use assertive debt collection techniques. Know when to make phone calls, send written requests for payment, and statements, and know when it is time to hand it over to a collection agency.

7. Put off any plans for expansion. It is better to stick to what you are already good at and just try to make it better.

8. Negotiate with your suppliers. You can try to barter down what you are paying your suppliers. If you have a long term relationship with any of your suppliers then you may be able to get better credit terms.

9. Outsource certain jobs or tasks. Business owners can take advantage of a growing pool of professional freelance workers for any job or project that will take away from the business. This is a cheaper option to hiring employees, and you can get some quality work.

10. Focus on customer satisfaction. Work on retaining the customer base that you have built up with follow-through, good customer service, and quality control.

11. Know your financing options. Know where to get money before you need it. Some financing options are based on future sales and have flexible repayments, such as invoice factoring or merchant/ business cash advances. Focus on building relationships with current lenders, and do not forget about any family or friends who may be able to help you out in a pinch.

Success depends on how effectively you can differentiate your products, services, and solutions from those offered by your competitors. In order to build and maintain your unique selling point among customers, you need to be aware of what your competition is doing. Although “spying” is an extreme term, focused attention and research on your competitors will help your business stay one step ahead!

1. Identify your competition. The first thing that you need to do is find out who your competitors are. If you do not know this information off-hand, then you can do a little research. Check the phone directory, do an on-line search to find out which businesses in your immediate market are offering similar products or services.

2. What marketing techniques do they use? Next, you should look at your competitors’ marketing strategy. To do this you should collect and examine your competitors’ marketing material, such as brochures, print advertisements, web pages, and articles in which they were featured. Also look into any broadcast advertising.

3. What is the selling point? After examining your competitors’ marketing strategies, you should be able to determine the different selling points that each company is promoting.

4. What is the customer experience? Another important piece of information to have about your competition is what it feels like to be their customer. You can go to a competitor as a mystery shopper, check out their websites, or call up for an estimate of services to see what the customer service is like. You can also talk to their customers to see how satisfied they are, and to find out why they choose to do business with a certain competitor

5. Where are your competitors holding? Find out if your competitors’ business is growing, maintaining, or declining. You can do this by looking at their stocks, available financial statements and reports, or credit and background profiles. This will give you vital information about market demand and how well your competition is tapping into it.

Even with all the talk of an economic recession, opportunities for entrepreneurs and small business owners abound. Upscale consumerism, green consciousness, products and services for the elderly, a dizzying array of cutting-edge computers and mobile devices, all of these areas promise rapid growth. Plus, many of these industries target broad markets leaving the door wide open for entrepreneurs to find their niche.Let’s take a closer look at each one of these areas:

The Refined Consumer

Today’s consumers are very selective. This is especially true in the food industry where the demand for unique flavors, refined tastes, and specialty items is on the up. Promising areas of growth include: specialized alcoholic and non alcoholic beverages (high-end wines, micro-brews, unique flavors), and upscale food and desserts. Due to a rise in food allergies, many people are seeking products that are gluten-free, low-glycemic, and free of allergens.

Special attention is also being given to the way food is presented and packaged. You can expect to see packaging that is either environmentally friendly or super convenient.

And for those of us who are constantly online, you may be just a few clicks away from having your lunch delivered directly to your door.

It’s Easy Being Green

What was once the exclusive domain of naturalists and nature enthusiasts is now becoming mainstream. A growing awareness of the environment has created a vast, popular market that is opting to “go green.”

Look for continued growth in solar powered products and services and organic fuel production and usage, as well as an increased demand for organic food and “green clothing.”

Businesses are also looking to make their operations more environmentally friendly, which means there will soon be an army of green business consultants and other companies providing support for the transition.

Coming of Age

With so many advances in the health industry, more people are living longer, and as the baby boomers near their twilight years, the elderly population is expected to reach overwhelming proportions. Experts are predicting a imminent shortfall of qualified support, staff, and equipment that cater to the elderly.

Entrepreneurs seeking to tap into this market will find ample opportunities in senior services, staffing, medical devices and equipment, medications, and anti aging products.

Tech Integration

In the past two decades, the rapid growth in computing technology, mobile devices, and electronics has outpaced any other industry. This coming year may have a little less growth, but more integration of technology with the way we live and do business.

According to a recent article in the McKinsey Quarterly entitled “Eight Business Technology Trends to Watch“, current and emerging technology provides invaluable tools that, if used properly, will help managers effectively run and grow their businesses.

As small and mid sized businesses try to integrate technology into their business practices, look for an increased demand for IT consultation and support.

It is possible for a small business to make it big, even in an economy that is slowing down, and even with stiff competition from big corporate competitors. By paying attention to the following five areas, you will be able to bring out the best in your small business:

1. Plan it out. Business planning is not just for start-ups, and it is not something that happens only once a year. It is a continual process of setting goals, developing plans, and working every day to achieve them. Proper business planning includes: financial budgeting and forecasting, tax planning, monitoring daily cash flow, and planning promotions and marketing strategies.

If you are not familiar with certain business terms, concepts, or tools, then you can turn to plenty of on-line guides, articles, and tutorials that can increase your business acumen. Alternatively, you could hire a business planning consultant.

2. Know how and where to get financing. One of the biggest reasons why small businesses fail is that they are unable to get adequate financing. Due to bad credit, slow or inconsistent sales, or being part of an industry that is considered more risky, many small business owners experience difficulty acquiring a standard business loan.

The first thing to keep in mind is that you will greatly increase your chances of getting approved for a business loan if you come to the application process fully prepared. Make sure to become familiar with the requirements necessary to secure a loan before applying.

You should also keep in mind that there are other financing methods available to small businesses aside from a standard loan, such as equipment leasing, invoice factoring, vendor financing, and business cash advances.

3. Be customer-focused. One thing that many small businesses have over big corporations is the personal relationship they can maintain with their customers. Do not overlook this vital asset! Customer-service goes beyond saying,”Have a nice day.” It means focusing on quality products and service, and monitoring customer satisfaction; it means actively asking your customers for suggestions or improvements and then following through on anything that can be implemented.

4. Cultivate your employees. Many small business owners do not realize the potential hidden within their own workforce. When your workers are happy that means increased productivity and a positive customer experience that can increase sales. Your workers are also a source of business-improving suggestions and problem-solving ideas.

Make sure to have in place a system for employee advancement as well as a system that recognizes consistent and outstanding work performance.

5. Create opportunities to expand. Do not just sit around and wait for an expansion idea to fall into your lap… create one! You should be investing some time and resources to research and development to determine possible areas of expansion and to implement cost-cutting techniques. Not only will this ensure that your business is running efficiently, but it will help your small business to be flexible in response to market demand.

Following these tips combined with a lot of hard work and a bit of luck is the key success!

According to the Small Business Association, the majority of newly established small businesses will not survive past five years. Such statistics may not sound encouraging if you have recently started your own small business, but with a little bit of planning you can easily buck this trend.

The following are a few key factors that, if left unattended, can cause even the best business idea to be unsuccessful:

1. Lack of effective planning. Business planning is a continual process of setting goals, developing plans, and working every day to achieve them. Proper business planning spans all areas of the business including budgeting, tax planning, growth opportunities.

2. Failing to monitor the business. Planning means nothing if you are not monitoring how well your business is running and making necessary adjustments. You should pay attention in particular to your daily cash flow, productivity, and the movement of products through your business.

3. Lack of necessary cash flow. One of the biggest reasons why small businesses fail is that they are unable to get the funding they need when they need it. Keep your options open. Even if you are having difficulty securing a standard business loan, know that there are other financing methods available to small businesses, such as equipment leasing, invoice factoring, vendor financing, and business cash advances.

4. Ineffective marketing techniques. Marketing is essential to expanding and maintaining your customer base. If your current marketing techniques are not bringing in customers, then reevaluate them. If you do not have the time or knowhow to effectively market your business, then hire someone else to do it.

5. Ignoring competition. Business success depends on how effectively you can differentiate your products, services, and solutions from those offered by your competitors. Your unique selling point is your greatest asset. In order to maintain your competitive edge and stay in touch with current market trends, you need to be aware of what your competition is doing.

6. Out of touch with customers. Having a personal relationship with customers is an important asset that many big corporations do not enjoy. In order to maintain good relations with your customers, you should focus on quality products and service, monitoring customer satisfaction, and asking your customers for suggestions or improvements.

7. Not actualizing employees. Many small business owners do not realize the potential hidden within their own workforce. When your workers are happy then productivity rises and customers have a more positive experience that can lead to an increase sales. Your workers are also a source of business-improving suggestions and problem-solving ideas. Therefore, make sure to establish a system of employee advancement as well as a system that recognizes good work performance.

8. No research and development. To be successful, a small business must set aside time and resources to research and development to determine possible areas of expansion and to implement cost-cutting techniques. This ensures that the business is running efficiently and improves flexibility in response to market demand.

9. Lack of information. Most business owners have either never received a formal business education or are inexperienced with running a business, and they may lack the tools and ideas necessary to successfully run their businesses. The good news is there are numerous guides, articles, and tutorials available on line (like Entrepreneur , or the Wall Street Journal) that can give you practical advice and an extensive business education.

Don’t become a statistic!

Many small business owners are unknowingly paying more than they have to towards their federal taxes!  Much of this has to do with either ignorance or confusion regarding what can and cannot be deducted. If you are looking the maximize your tax deductions this year, then consider the following recommendations. Please note, however, that the conditions may vary depending on the unique circumstances of your business, you should consult with an accountant or professional tax consultant before making any decisions.

1.Tax planning is year-round. Many small business owners do not start thinking about their income tax deductions until the end of the year draws near. Since small businesses often deal with tight cash flows and small profit margins, they stand to benefit a lot from a full reduction in their tax payments. To do so requires planning and foresight that really extends throughout the whole year!

2. Efficient financial accounting. The next step in maximizing your small business tax deductions is having an accurate picture of your company’s financial situation. Your books should be clear and up to date. You should also have a system for collecting and filing any receipts for business expenses. Finally, you need to be on top of your cash flow, namely accounts payable, accounts receivable, and inventory.

3. Hire a tax consultant. Hiring an accountant or a tax consultant, is good business practice- especially if you are unfamiliar with basic business accounting. Hiring such a professional is a tax-deductible business expense, and the tax advice you will receive should also help pay for the cost.

4. Increase your expenses. One well-known method of increasing your tax deductions is by increasing your business expenditures shortly before the years ends. Depending on your available cash flow, you could do the following:

• Purchase items your business will require in the immediate future, such as office supplies
• Pay any outstanding bills, such as rent or utilities, early
• Take care of any repairs or maintenance that you have been putting off
• Make any business trips to existing or potential customers

5. Make year-end equipment purchases. If plan on buying buying new office equipment or furniture, then consider purchasing it at the end of the year. You will then have to decide whether you want an immediate write off or a depreciation that is spread out over a few years. Keep in mind that to claim the deduction, your equipment needs to be set up and in use by year-end.

6. Delay or defer income. Any income that is expected in December, but can be deferred to January, will lower your yearly business income. If your income is smaller, then the taxes you will have to pay will be accordingly reduced.

7. Split your income. By splitting your income among family members hired to work in your business, you can reduce your tax liability.

8. Contribute to a retirement plan. Making payments to a retirement plan is another good way to reduce your tax obligation. If you do not currently have a retirement plan then consider setting one up before the end of the year. In the US there are several plans to choose from, each with their own terms and conditions, so make sure to check these out beforehand.

9. Be aware of what can be deducted. Small business owners who want to take full advantage of income tax deductions need to be familiar with expenses they are entitled to claim. The following is a brief list of some common deductible expenses. For more information regarding how and when these expenses can be deducted, you should consult with your accountant or professional tax consultant.

• Advertising and Promotional Expenses
• Banking Fees Including:check charges, monthly charges, bank wire fees or overdraft fees.
• Business Gifts
• Business-Related Education, such as seminars, classes, and educational tapes or video
• Charitable Contributions
• Conference and Convention fees
• Equipment and Furniture This includes the cost of the equipment, furniture, or vehicle purchased, as well as depreciation on old equipment, and lease payments
• Health-Insurance Premiums
• Insurance (for buildings, machinery or equipment)
• Interest and Fees (on money borrowed for the business)
• Losses Losses from theft, fraud, damage from natural disasters
• Meals and Entertainment
• Membership Dues
• Moving Expenses
• Office Rent Expenses
• Office Supplies
• Postage and Shipping Expenses
• Professional Fees Including: legal help, accounting and bookkeeping, architectural, business consulting and marketing consulting)
• Property Taxes
• Repair and Maintenance On the building, grounds, and equipment
• Retirement Accounts for self and employees
• Salaries of Employees
• Software Costs
• Taxes This includes: sales tax on items purchased for business usage, real estate tax on business property, employer’s share of employment taxes, excise taxes and, in some instances, state income tax
• Telephone and Telecommunications Expenses Including, Internet, television and other communication usage for business purposes
• Trade-show exhibition and/or attendance Including travel, meals, admission fees and costs of booths or exhibitions.
• Travel This includes: automobile expenses pertaining to business usage, using either actual costs of repair and gas or the standard mileage deduction, hotels, airfare, meals, laundry and business entertainment while on the road. You can also claim the costs of passports for self and employees when traveling for business purposes
• Utilities

 Don’t pay more taxes than you need to… Be creative, Be smart!

Did you know that you can use social networking sites to promote your business?  This is true whether you have a hair salon, a restaurant, a bar or an auto shop.  Social Networking sites (like MySpace ) are free and are a great way to advertise, build, and maintain your customer base.

A quick search on myspace showed eight salons in downtown Chicago and three bars.  Do a search of your zip code and see which of your competitors are on the social networking bandwagon.  Whether there are many, or none, it is in your best interest to try it out for yourself. 

You would be surprised to see how many people will connect with  you, especially if you have a sign on-site telling people about your myspace page.  You can use the page to post promotions, pictures and to chat with your customers.  In turn, their friends will see that you are connected with them.

Sign up to the sites and try them out!  If you have any customer email addresses, you can punch them in and see who is online.

Use today’s technology to help your business.  

You’ll find a lot of articles with the top seven, but most ignore alternative financing options like number 8.

Commercial bank loans. – Key to remember:  Because one bank says no, doesn’t mean others won’t say yes.  If you are looking into this option, be prepared to apply at multiple banks.

SBA loans. – With a 7(a) loan: private-sector lenders grant loans, and the SBA guaranties up to 85 percent of the principal.

Investors. – Most small businesses prefer that investors provide equity in place of debt.  Many find that finding numerous smaller investors is easier than one or two big ones.

Seller-based financing. – This is a good alternative when other options are limited.  Also, the willingness of a seller to finance a buyer demonstrates a certain amount of faith that the product/business will succeed.

Partnerships. – As I heard one person put it: “Partners can provide a good source of funds, but sometimes too many cooks spoil the broth.”  There are lots of pluses and minuses to partnerships. I explored many of them in a previous posting.

Venture Capital. – According to financial consultant and accountant Brad Saltz, venture-capital firms usually want a “much greater partnership and to have far more say…” in determining your company’s direction. They expect to see a large return within three to seven years.

Combination financing. – Also known as combi-deals.  One example, is that it is much easier to get a bank loan, once you have found investors.  This is because, investors provide the equity the banks need to see in order to be able to give you a loan.

Credit Card Factoring. – This alternative financing method can provide up to $250,000.  Unfortunately, it is only available to existing businesses who’ve been accepting credit cards for 4 months.  The plus is that it is unsecured, quick and doesn’t require that you have good credit.  It is also known as business cash advance.

Happy Financing!

From the New Yorker: 

“When I mortgaged my soul, you didn’t tell me it had an adjustable rate.” (Man talking to devil in office.)

As the old adage goes:  The large print giveth, the small print taketh away. 

More and more individuals and small businesses are learning this the hard way now that interest rates are shooting up.  To make things worse, their revenues are also suffering in this economy.  And, to add insult to injury, if they need a new loan, or want to refinance – they are rejected.

All this is a great reason to look at alternative financing.  Whether it is person-to-person financing (prosper.com) or something along the lines of what we do (credit card factoring) – it is in your business’ best interest for you to explore your options.

I had an inspirational thought today as I was looking through the business headlines. 

All those businesses out there buying other businesses for millions of dollars: they all started as small businesses. 

Pretty much every business in existence started as a small business.  Whatever your field, there are large businesses in your field which started just as small as you are. 

To me that is incredibly inspirational.  It’s the “American Dream” which I grew up hearing about:  If you work hard, you will succeed.  Unfortunately, there are a lot more factors these days, and the American Dream isn’t always true.  But it’s nice to see that it sometimes works.

What’s holding YOUR business back?  Let me know, maybe I’ll do a post on the issue.

In any case, I hope to be seeing you in the national headlines in another few years.  🙂