Over the past two weeks, we have been focusing on strategies that small business owners can implement to counter the negative effects of the global economic downturn. If the going is getting tough for your business, it’s time for you to get innovative in meeting your customers’ needs and publicising your products and services.

To ensure that your business can survive and even succeed in challenging financial times, you have to focus on the efficiency of your operations. Under normal circumstances, small businesses falter and fail from using improper procedures and expensive processes. In this period of economic uncertainty it is vital for your business to become a lean, cost-effective machine.

One of the most pressing concerns for small businesses is maintaining a positive cash flow. As the saying goes, ‘Cash is king,’ and to survive a financial downturn, entrepreneurs must have a good handle on incoming and outgoing cash. Even a minor reduction in sales can trigger off the inability to meet bills, source raw materials and generally stay afloat.

Organise Accounting Processes

For this reason, small businesses must be equipped with simple accounting processes that can reveal when key money indicators are in trouble. I have seen people get into massive debt and have to close their enterprises, because they had no method to quickly ascertain that they were not profitable. You can’t wait until the accountant’s end-of-year report to make vital changes to your business.

Clive Palmer, managing director of Simon Palmer & Associates Limited, a management consultancy specialising in accounting software solutions, confirmed that small businesses need to adopt good accounting practices to survive in these times. Palmer said that having your finger on the pulse of key indicators of business performance such as the bank balance, receivables, debts and inventory, was the way to take control over your finances.

Palmer recommended that small business owners use a simple accounting package such as Quick Books, to help them to quickly know the true state of their affairs. “You have to make the right decisions based on real-time information, not on gut feelings,” Palmer insisted. Palmer noted that Quick Books was ideal for small business owners because it was geared for non-accountants, and that it would also help to make the year-end financial process easier and less expensive.

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Outsource Some Services

Another way to manage costs in these challenging times is to outsource some of the areas needed to produce your product or service. Contracting another firm or hiring a virtual assistant to do specific tasks outside the company can bring several benefits to your bottom line.

First of all, a small business that carries out all its supplementary tasks such as public relations, IT services and human resources in-house, might find that too much time and money is being spent on non-core functions. Outsourcing can therefore help the business to concentrate limited resources in the areas of greatest expertise.

Sydoney Brackett, founder of Classique Virtual Business Services, agreed that a virtual assistant can be the solution to help small businesses grow while keeping costs low.

Brackett explained that a virtual assistant can work part-time, either on location or away from your office on a contractual basis. The overhead costs that normally come with a full staff complement now becomes the responsibility of the virtual assistant, she confirmed.

“In addition, a virtual assistant has to be multi-skilled and constantly learning new techniques,” Brackett asserted. “This brings more flexibility to your organisation, whereas the normal worker often gets complacent in a particular job function.”

Open An Internet Store

One solution to a shrinking client base is to expand your business to reach new customers. Unfortunately this can bring increased overhead costs, which may not be easily recoverable from increased sales. How can small businesses grow their operations without incurring significant expenses?

Ronald Stephenson, CEO of  VirtualMallJamaica.com, declared that opening an online storefront is the perfect compromise for cost-effective business expansion.

Stephenson explained that renting space on the Internet shopping hub reduces staffing costs, as all the virtual workers-sales agent, inventory manager, cashier, accountant, and shipping supervisor – are already built into the system. Other typical physical costs such as utilities and security are non-existent, he concurred.

Stephenson pointed out that business owners still needed to work at marketing their online business. “Use the savings gained from selling online to promote your Internet storefront, as you have to push people to your website to buy.” He recommended these low-cost methods to grow an online business:

1. Give price discounts and other benefits to persons who buy online;

2. Send email marketing updates to your database;

3. Brand stationery, shirts, pens and promotional material with your web address;

4. Use online advertising media and Google keywords to help your target market find your store.

The entrepreneur’s response to challenging times must be a determined outlook, not despair. Get creative in your products, promotions and practices, and work towards a successful future!

Copyright © 2009 Cherryl Hanson Simpson. No reproduction without written consent.

Originally published in The Daily Observer, February 26, 2009

Cherryl is a financial consultant and coach, founder of Financially S.M.A.R.T. Services. See more of her work at www.financiallyfreenetwork.com and www.financiallysmartonline.com. Contact Cherryl