Saturday, 21 September 2013

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 stock 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 the 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 once a month and



present material for review. Each meeting should be a discussion



of your business problems and an input from your advisors



relative to possible solutions. These members of your board od



advisors should offer you advice as well as alternatives, and



provide you with objectivity. No formal decisions need to be made



either at your board meeting, or as a result of them, but you



should be able to gain a great deal from the suggestions you



hear.





You will find that most of your customers have the money to pay



at least some of what they owe you immediately. To keep them



current, and the number of accounts receivable in your files to a



minimum, you should call them on the phone and ask for some kind



of explanation why they're falling behind. if you develop such a



habit as part of your operating procedure, you'll find your



invoices will magically be drawn to the front of their piles of



bills to pay. While maintaining a courteous attitude, don't



hesitant, or too much of a "nice guy" when it comes to collecting



money.





Something else that's a very good business practice, but which



few business owners do is to methodically build a credit rating



with their local banks. Particularly when you have a good cash



flow, you should borrow $100 to $1,000 from your banks every 90



days or so. Simply borrow the money, and place it in an interest



bearing account, and then pay it all back at least a month or so



before it's due. By doing this, you will increase the borrowing



power of your signature, and strengthen your ability to obtain



needed financing on short notice. This is a kind of business



leverage that will be of great value to you if or whenever your



cash position becomes less favorable.





By all means, join your industry's local and national trade



associations. Most of these organizations have a wealth of



information available on everything from details on your



competitors to average industry sales figures, new products,



services, and trends.





If you are given a membership certificate or wall plaque, you



should display these conspicuously on your office wall. Customers



like to see such "seals of approval" and feel additional



confidence in your business when they see them.





Still another thing often overlooked: If at all possible, you



should have your spouse work in the business with you for at



least three or four weeks per year. The important thing is that



if for any reason you are not available to run the business, your



spouse will be familiar with certain people and situations about



your business. These people should include your attorney,



accountant, any consultants or advisors, creditors and your major



suppliers. The long-term advantages of having your spouse work



four weeks per year in your business with you will greatly



outweigh the short-term inconvenience. Many couples share



responsibility and time entirely, which is in most cases even



more desirable.





Whenever you can, and as often as you need it, take advantage of



whatever free business counseling is available. The Small



Business Administration published many excellent booklets,



checklist and brochures on quite a large variety of businesses.



these publications are available through the U.S.Government



printing office. Most local universities, and many private



organizations hold seminars at minimal cost, and often without



charge. You should also take advantage of the services offered by



your bank and local library.









The important thing about running a small business is to know the



direction in which you're heading; to know on a day-to-day basis



your progress in that very direction; to be aware of what your



competitors are doing and to practice good money management at



all times. All this will prepare you to recognize potential



problems before they arise.





In order to survive with a small business, regardless of the



economic climate, it is essential to surround yourself with smart



people, and practice sound business management at all times.

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