The Art of Business

Prosperity in Times of Uncertainty

You may be in mail order, direct marketing, or you may be a local merchant with 200 employees or a retail shop owner with just a handful of employees. Whatever the case, you’ve got to know how to keep your business alive during periods of economic recession or anytime the cash flow starts to tighten up. You have to properly manage your money to keep your business running like a well-oiled, failure-proof machine. Here are a few tips gathered from a lifetime of experience.

Always protect 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, in response to a convincing advertisement, or due to the persuasiveness of a good salesperson. Later, we wake up and find that we’ve committed hundreds of dollars of operating capital to an item or service that is not in the least essential to the success of our business when other, more important items have been waiting for those dollars.

In difficult times, companies’ moves should be smaller, more agile, and more opportunistic; that is, they should constantly reassess business strategy and make lots of short-term moves to fulfill it rather than depend on big, slow-to-develop approaches. It is almost impossible for an entrepreneur to have all the answers, that’s why having the right professional advise always pays off, especially in hard times when there is no room for mistakes, and every decision counts.

While you may think you cannot afford it, be sure that you don’t shortchange yourself when considering the professional services of attorneys, accountants, or business consultants. This applies during times of expansion as well as recession. Anytime you commit yourself and move ahead without completely investigating all the angles or preparing yourself for all the possible contingencies, 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 taking a major financial risk.

Don’t forget your customers, they are the reason you are in business.

Too many companies don’t understand their own business models and don’t trust their customers. In a knee-jerk reaction, they cut their marketing and violate the rule that Sam Walton (founder of Wal-Mart) used to tell: Whenever you get confused, go to the store. The customer has all the answers—and all the money.

In the wake of the Enron debacle, accounting practices have jumped to the forefront of attention. Your company’s books should reflect your strict standards, and whoever maintains them should generate information according to your policies. In this way, you’ll uncover any potential financial problems before they become readily apparent or get out of hand. Probably the most important thing for a small business is to be on top of the financial picture. Good accounting practices and up-to-date bookkeeping allow the entrepreneur to know what’s going on, and to adapt quickly to changing situations.

Many small companies set up advisory boards composed of outside professionals. Sometimes known as Power Circles, once in place the business always benefits from the advice of these boards, especially in times of difficulty. Such an advisory council typically includes an attorney, a certified public accountant, civic club leaders, owners or managers of businesses similar to yours, and retired executives. Establishing such an advisory board of directors is not necessarily easy although most people you ask will be honored to serve. Think in terms of what they can get out of it: public recognition, networking opportunities, the chance to give back to the community. In turn you’ll get advice as well as alternatives, and it’ll provide you with objectivity.

Having a game plan is also a fundamental aspect in the success of a business. It starts with a very firm belief in the business that you’re in. One of the best ways to get through a downturn is to have a firm understanding and belief that there’s going to be an upturn. Another thing to do is invest in Research & Development through thick and thin. Try to gain market share in the downturn through that R&D. Finally, explain what you’re doing to your constituents: your shareholders, your customers, and your employees all need to know the game plan. It’s built into their expectations when they buy the stock, when they buy the product, or when they join the company.
The best companies use down cycles as opportunities to change the game. They figure out where they want to be when they come out of a turbulent time, and then they lay the groundwork necessary to move toward that goal. If you know where you want to be when the economy comes back, you can make the smart moves to get there.

The biggest mistake? Not seeing a downturn as a time to make investments. During a downturn, you can acquire assets and capabilities at the low end of the market and be positioned to take advantage of them during the upturn.
If you are experiencing a lag in the payment of accounts receivable, take the necessary steps to insure prompt payment by your customers. You will find that most customers have the money to immediately pay at least a portion of what they owe you. To keep them current and to decrease the number of accounts receivable in your files, call each account on the phone and politely remind them that their account is overdue. If they are hesitant in responding, or if they continue to fall behind, call and ask for an explanation of why they’re past due. While maintaining a courteous attitude, don’t be hesitant or too gentle when it comes to collecting money. If you develop a polite but no nonsense approach to the collection of delinquent accounts as part of your operating procedure, you’ll find customers will more quickly pay your invoices rather than risk having to explain their delay.

Definitely join your industry’s local and national trade associations. Most of these organizations have a wealth of information available on everything: details on your competitors, average industry sales figures, new products, services, and marketing trends. If you are given a membership certificate or wall plaque, display it conspicuously on your office wall. Customers like to see such seals of approval and feel additional confidence in your business when they see them. Also, become a member of one or more civic groups in your community. Besides the good works that you will be helping perform in your community, you will be creating a myriad of friendships and business connections that will provide you an unlimited number of future opportunities.

As often as possible, take advantage of any free business counseling available to you. The Small Business Administration publishes many excellent booklets, checklists, and brochures on a large variety of businesses and offers advice through the Small Business Development Centers located throughout the country. Publications are available free or for a minimal charge through the US Government Printing Office. Most local universities and many private organizations hold seminars at minimal cost or without charge. You should also take advantage of any services offered by your bank and local library.

The most important aspect of running a small business is to know precisely the direction in which you’re heading. Determine on a day-to-day basis your progress toward your goals. Always be aware of what your competitors are doing, and practice careful money management at all times. All this will prepare you to recognize potential problems before they arise.

Small business survival is based upon knowledge. Knowing in advance any possible pitfalls along the way will better prepare you to meet the various challenges that face an entrepreneur. Seeking the advice of knowledgeable counsel, whatever the field, will help you develop a winning plan and become a success. Seize the opportunity. As the old saying goes, “A journey of a thousand miles begins with a single step.” Take that step toward your future now!

—Dr. Enrique “Rob” Lunski

Dr. Enrique “Rob” Lunski is a Highland-based business consultant who frequently lectures about economic development, the Internet and cultural issues. Lunski’s work to promote economic, social and cultural development in the Hudson Valley has gained him a Congressional Award presented by Congressman Maurice Hinchey, and letters of commendation from, among others, New York Governor George E. Pataki.

On March 8, Lunski, in collaboration with the Mid-Hudson Valley Small Business Development Center, the Center for Financial Wellness, ProActive Consulting and the Pritzer Studio at Casa del Arte will present a business retreat for entrepreneurs, “Prosperity in Times of Uncertainty” at the Casa del Arte in Highland. For more information, call 691-5506 or e-mail roblunski@aol.com.