5 Tips for Surviving a Small Business Rough Patch

Every small business eventually hits a rough patch. It’s easy to get discouraged when it happens. But look at the upside: you have infrastructure in place, you have existing customers and most importantly, you have the hard-won experience of knowing what works and what doesn’t.

When things start to get rocky, take a close look at the inner working of your small business operations and finances. Better yet, consider partnering with a small business advisor and hear out their recommendations.

With that in mind, here are some ideas to get things back on track:

1. Focus on triage. Just like a hospital ranks patients for attention according to the severity and urgency of their injuries, you need to rank your biggest issues. First list what needs to be done urgently, such as paying bills, making payroll and delivering orders. Then rank what is most important long-term, like reviewing expenses, improving marketing and advertising, and gathering sales leads.

   For this reason, “It’s extremely important to have good accounting records when your business is struggling. Otherwise, you will not be able to efficiently diagnose where your problems are in the business,” points out Ren Cicalese III, CPA, MST.

   This process means setting aside the idealistic business plan you had before you ran into problems and focusing on the nitty-gritty business realities of revenue, expenses and cash flow. You can pick up the business plan after you plug the holes in the boat, and revise it based on what you learned from your difficult period.

   “To alleviate potential cash flow problems, consider obtaining a credit line ahead of any downturn in business,” suggest Rich Middleton, CPA.  “A lender is more likely to advance credit when your financial picture is more attractive.”

 

2. Cut costs. If you are running into troubles you may be spending money on things that aren’t working. Try this exercise before trouble is seen on the horizon: ask yourself what you would eliminate first if your business situation took a turn to the worse. Second? Third? You’ve just made your cost-cutting priority list.But be cautious about what you cut.

   “The largest expense for any business is often payroll. As a result this is one of the first areas of expense that owners look to cut. However, it’s important to consider if this is a problem area that needs to be addressed or if it’s just a temporary fix.” – Ren III

 

3. Get market information. When your business isn’t working well, you need to take a closer look at your market. Look at what your most successful competitors are doing. Pick the brains of your customers, your vendors and your employees for their opinions about the products, services and companies in your industry.

 

4. Improve your offering. Based on what you’ve learned from your market research, make improvements to your product or service. Use your research and business experience to help you narrow down your list to a few ideas, which you can then test through trial-and-error. One of the most disciplined ways to do this is through A/B testing: create two versions of your offering with one variable changed. Keep whichever one does better and scrap the other, then offer a new A/B test using the improved version. Your products or services will get better over time based on market feedback.

 

5. Improve your operations. Your product or service may be great, but for some reason it’s not getting the attention of customers. Meanwhile, a competitor may be outselling you with something inferior. If that’s the case, you’ll need to revamp your operations: your marketing, advertising, sales and online presence. You can use the same A/B process you used to improve what you’re selling to improve how you sell: change one variable at a time and learn from trial-and-error what works and what doesn’t.

Remember, great businesses are those that address problems and use them to grow. When seen in this light your business will often become stronger as a result of periodic challenges.

“If you’re struggling on finding success with your own analysis, it may be best to hire a consultant to help. A consultant should be able to help identify your problem areas and offer advice on how to improve your business.“ – Ren III

Need a small business growth partner? Alloy Silverstein’s accountants and advisors are here to guide you throughout the business life cycle, from the valleys to the peaks. Contact us today for a consultation.
The information contained in this newsletter is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance. For more information or for assistance with any of your tax or business concerns, contact our office at 856.667.4100.