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What’s Next For Your Micro-Business
Housing Slowdown Impacts Small Businesses
In the Discover Small Business Watch for August, more than one in three small-business owners said that the recent changes in the housing market have had a significant impact on their businesses.
And the impact is all about money.
Small-business owners worry that if securing credit becomes more difficult, they could find financing for their firms hard to come by or more expensive because of higher interest rates.
In addition, if the downturn in the housing market and a crunch in consumer credit causes consumers to close their wallets, small businesses could be hit with cash flow problems.
“Small-business owners are clearly feeling the impact of recent shifts in the housing market,” says Sastry Rachakonda, director of Discover’s small business credit card.
In the August Discover Small Business Watch, 41 percent of small-business owners said that they have experienced cash flow issues in the last 90 days. Only 36 percent of respondents said that they feel that economic conditions for their business are getting better.
“While small-business owners’ feelings regarding the overall economy remain steady . . . they are far less optimistic about the economic conditions for their own business, which is likely resulting from the cash flow concerns they are encountering,” says Rachakonda.
What You Can Do
The housing slowdown has the potential to impact a multitude of small businesses, not just those affiliated with the real estate industry.
Furniture sellers, plumbers, landscapers and others associated with housing could certainly feel the pinch. But so too could car dealers, restaurants, art galleries and other firms that depend on consumer spending.
No matter what your industry, here are six steps you can take to help you weather economic shifts.
1. Watch your cash flow carefully. Bill on time and make every attempt to collect accounts receivable on time.
2. Increase your emergency fund. Set aside more cash so you have it liquid and on hand to cover any cash flow shortfalls. That cash can also tide you over if sales begin to slow.
3. Take precautions before extending credit to customers. Make sure you perform due diligence before extending credit to new customers. You might even want to tighten your credit-lending standards.
4. Reduce your spending. In uncertain times, it can pay big dividends to cut even little expenses. Some good places to look for cost reductions: utilities, supplier contracts, office supplies and inventory.
5. Improve customer service. It takes little money to hone your customer service skills. Yet outshining the competition on service can keep customers coming back – an important strategy especially when times are tough.
6. Don’t wait until your small business is in trouble to ask for help. Develop a relationship with a banker or other lender when times are good and your financials are strong. Get a line of credit that you can tap to see you through the economic rough patches.
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(Posted October 2007) |
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