Being flexible and thinking ahead

Posted by hecto on March 10, 2009 under Business Ideas, Business Plan, General Management, Tips | Be the First to Comment

All around the globe small businesses have been hit by the recent credit crises; if you have not already been affected then it will still come. Some analysts say that this will be a hard time for small business owners as they will find it difficult to find credit and continue their daily operations. However this is predicted to be a short term problem. While many big banks in USA and Europe go bust the ultimate affect will lead to many more small businesses going bust. The truth is harsh but it will happen. The main problem is that at this time investors and banks are scared of letting go of their money due to the uncertainty in the economy, investing in a very volatile economy is extremely risky. Furthermore as the banks go bust it means that they don’t actually have enough money to lend because investors have pulled their money out of the markets.

Unless you are selling in a very specific niche market and you do not need large amounts of credit you will be affected. Either your sales will fall as people stop spending and start saving or the bank will not give you the much needed loan. If you live in UK or the USA you probably have noticed how the banks advertisements have changed from advertising their “great” mortgage deals to advertising their “great” saving accounts. This demonstrates how the banks have anticipated the change in the economy and are preparing for a recession in the economy.

Many of the big players fall during a recession because they are too dependant on a growing economy and fail or refuse to accept that the economy will not keep growing for hundreds of years without also major falling just like major increases. Being small during a recession can also be used as a major advantage because it means you are more flexible in your operations. What I mean here is that if you see that you are unable to meet mortgage re-payments then sell off and downsize, don’t use all your savings up and then before you know it you have gone bust. Another example is that if you have two warehouses and your customer base has decreased then downsize to one warehouse.

My main point for small business owners is that do not go against the flow but with the flow. While in a booming economy you expanded in a failing economy you downsize.