Survival Tips For Small Businesses


You

may be in Mail Order, Direct Mail, or you may be a local

merchant with 150 employees; whichever, however or

whatever... you've got to know how to keep your business

alive during economic recessions. Anytime the cash flow in

a business, large or small, starts to tighten up, the money

management of that business has to be run as a "tight ship."

Some of the things you can and should do include

protecting yourself from expenditures made on sudden

impulse. We've all bought merchandise or services we

really didn't need simply because we were in the mood, or

perhaps in response to the flamboyancy of the advertising

or the persuasiveness of the salesperson. Then we sort of

"wake up" a couple of days later and find that we've

committed hundreds of dollars of business funds for an item

or service that's not essential to the success of our own

business, when really pressing items had been waiting for

those dollars. If you are incorporated, you can eliminate

these "impulse purchases" by including in your by-laws a

clause that states: "All purchasing decisions over (a certain

amount) are contingent upon approval by the board of

directors." This will force you to consider any "impulse

purchases" of considerable cost, and may even be a

reminder in the case of smaller purchases. If your business

is a partnership, you can state, when faced with a buying

decision, that all purchases are contingent upon the

approval of a third party. In reality, the third party can be

your partner, one of your department heads, or even one of

your suppliers. If your business is a sole proprietorship, you

don't have much to worry about really, because as an

individual you have three days to think about your

purchase, and then to nullify that purchase if you think you

don't really need it or can't afford it. While you may think

you cannot afford it, be sure that you don't "short-change"

yourself on professional services. This would apply

especially during a time of emergency. Anytime you commit

yourself and move ahead without completely investigating

all the angles, and preparing yourself for all the

contingencies that may arise, you're skating on thin ice.

Regardless of the costs involved, it always pays off in the

long run to seek out the advice of experienced

professionals before embarking on a plan that could ruin

you. As an example, an experienced business consultant

can fill you in on the 1244 stock advantages. Getting

eligibility for the 1244 stock category is a very simple

process, but one with tremendous benefits to your

business. The 1244 status encourages investors to put

equity capital into your business because in the event of a

loss, amounts up to the entire sum of the investment can be

written off in the current year. Without the "1244"

classification, any losses would have to be spread over

several years, and this, of course, would greatly lessen the

attractiveness of your company's stock. Any business

owner who has not filed the 1244 corporation has in effect

cut himself off from 90 percent of his prospective investors.

Particularly when sales are down, you must be

"hard-nosed" with people trying to sell you luxuries for your

business. When business is booming, you undoubtedly will

allow sales people to show you new models of equipment

or a new line of supplies; but when your business is down,

skip the entertaining frills and concentrate on the basics.

Great care must be taken however, to maintain courtesy

and allow these sellers to consider you a friend and call

back at another time. Your company's books should reflect

your way of thinking, and whoever maintains them should

generate information according to your policies. Thus, you

should hire an outside accountant or accounting firm to

figure your return on your investment, as well as the

turnover on your accounts receivable and inventory. Such

an audit or survey should focus in depth on any or every

item within your financial statement that merits special

attention. In this way, you'll probably uncover any potential

financial problems before they become readily apparent,

and certainly before they could get out of hand. Many small

companies set up advisory boards of outside professional

people. These are sometimes known as Power Circles and

once in place, the business always benefits, especially in

times of short operating capital. Such an advisory board or

power circle should include an attorney, a certified public

accountant, civic club leaders, owners or managers of

businesses similar to yours, and retired executives. Setting

up such an advisory board of directors is really quite easy,

because most people you ask will be honored to serve.

Once your board is set up, you should meet about once a

month