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Asheville Citizen-Times: Surviving the downturn
By John Boyle
Here are some tips from the pros on how to survive and even thrive in down economic times:
Watch your cash – Control spending, especially on smaller items that can add up quickly before you notice it. Business people, just like regular Joes, spend way too much on small, discretionary items that really aren't necessary. However, avoid cutting spending that will directly impact customers and goods or services they receive. Collect – Without getting ugly, collect money that is owed you. This will improve your cash flow, help balance your books and improve your credit score should you need a loan. Retain those customers – In this economy, customers are gold, and lost customers are really hard to get back. To keep them, boost your service level, within financial constraints. Don't load up on inventory – An overload of inventory is money sitting in your shop or business. The perennial question is: “Do I buy volume to get a discount or buy what I can get away with to conserve cash?” Assess your financial situation and sales volumes to make the decision that's right for your business. Shop around – Do your homework on where you can get inventory and services at the best price. You may even want to consider having suppliers re-bid on your account or try to renegotiate pricing. Keep in mind that this depends on how reliable you've been with orders, the volume you buy and how dependable your payments are. Be respectful – If you do renegotiate, remember to do it in a businesslike, professional way. Stay away from ultimatums, which often sour relationships. If you show disrespect, you're giving the other business a chance to walk away from you altogether. Restructure loans – If you've got a high interest rate or are having trouble making payments, approach your lender about renegotiating the loan. Keep in mind that everybody wants to restructure right now, and lenders have lost some flexibility. Partner up – If possible, partner with other companies to buy necessities such as paper or other office supplies. Staff it right – Not many business owners like laying people off, but in this economy you've got to look at staffing. Keep the workers who add value to customers. If product lines or services will suffer without them, do your best to retain the employee. When hiring new employees, be extra choosy. With all the recent layoffs, it's an employer's market. Focus your marketing and advertising – Companies often cut these budgets first, but it's important to maintain a presence in the market and it's vital to advertise special events, such as sales. Understand your market and focus these efforts. A shotgun approach to advertising – hitting as many people as possible at one time – might be good for gaining new customers during the boom times, but it's not as likely to generate business in down times. Accentuate the positive – Yes, it sounds corny, but especially at the local level, business is about relationships, and no one wants to deal with someone who's always negative. If you create a negative memory with a customer, that person may not come back. Create “advocate customers” – These folks like your business so much they actually go out and advocate on your behalf. Never underestimate the power of word of mouth. Remember the Web – You've got to have a Web site presence these days, and you may find it can save you money on mailers and other paper-related expenses. You can also save on your training budget by utilizing online training. Look ahead – Business owners always have to be thinking about the future. Right now, consider if you'll be ready when the economy picks back up. Do you need to talk to your bank now about a future loan? Should you line up suppliers and adequate inventory now to meet future demand? Ask for help – The mountains abound with organizations that help small businesses start up and thrive. Here are four local resources for entrepreneurs: ---Mountain BizWorks. Nonprofit offering in-depth business planning courses, ongoing technical support and advanced training, and small-business loans up to $50,000. Location: 153 S. Lexington Ave., Asheville; telephone. 253-2834; Web site, www.mountainbizworks.org. ---SCORE (Service Corps of Retired Executives). Nonprofit volunteer wing of the U.S. Small Business Administration whose counselors serve as advisors and mentors to aspiring entrepreneurs and business owners. Many services are free, though there is a fee for seminars. Room 259, Federal Building at 151 Patton Ave., Asheville; 271-4786; www.ashevillescore.org. ---AdvantageWest. A nonprofit, public-private economic development commission chartered by the state and covering 23 western counties. AdvantageWest operates the Blue Ridge Entrepreneurial Council and the Blue Ridge Angel Investors Network, a funding source. 134 Wright Brothers Way, Fletcher; 687-7234; www.advantagewest.com. ---Small Business and Technology Development Center. Provides knowledge, education and support resources to small and mid-size businesses, emerging entrepreneurs and local and state leaders. Administered by N.C. State University in partnership with the U.S. Small Business Administration. Western Regional Office, 68 Patton Ave., lower level, Bank of America Building, Asheville; 251-6025; www.sbtdc.org/index.asp Sources: Wendy Cagle, regional director, Center for Small Business and Technology Development at Western Carolina University; Bob Dunn, business developer at Mountain BizWorks and owner of ESI Adivsors. Thrive in recession? Knowing your market, controlling debt are crucial In these economic times, you can't run a business casually. An owner has to be on top of everything from expenditures and marketplace changes to employee habits and what merchandise is moving. But the sour economy doesn't mean businesses can't thrive or even grow, especially if they're smart about budgets, personnel and keeping those customers happy.
At The Admiral restaurant in West Asheville, co-owners Drew Wallace and Jonathan Robinson opened in December 2007 with a plan for a “gastro-pub” — more upscale food with locally made beers. Business has steadily grown, but they did start to see a downturn in mid-2008 and implemented a slight course correction by offering smaller plates in the $9-$10 range. “I think people are really excited to get a nice piece of duck for $9 or $10 dollars,” Robinson said, noting that other small plates may feature rabbit or shrimp and grits. “We kind of developed that as we saw people were a little afraid to spend $13-$23 on the more expensive entrees. We noticed we weren't selling a lot of that.” Local business experts acknowledge that these are tough times for any business, but they adamantly maintain that businesses can thrive by being hawkish on cash flow and debt and really committing to take care of core customers. “There's that old saw that cash is the lifeblood of business, and it's more true now than ever,” said Bob Dunn, a business developer with Mountain BizWorks in Asheville and a professional business coach and owner of the business development firm ESI Advisors. “Secondly, if they have repeat or older customers, make sure those customers are retained without compromising what they offer. Customers are very hard to recover once they're lost.” Wendy Cagle, regional director for the Small Business and Technology Development Center at Western Carolina University, said now is a good time to reassess your business model and whether or not you're keeping people happy. “They've got to look at who in the past has been their bread and butter and try to market to them specifically,” she said. “Trying to do a shotgun approach is definitely not in their best interest, and financially it's not a good approach at this point.” Be demanding, flexible Also, if you are hiring, bringing the right people on board is more important than ever. At The Admiral, the owners have controlled expenses and have very little food waste because the menu changes every day and they use what they have on hand. But Robinson said the employees clearly are the key to success, and in a sluggish economy they can be very choosy about whom the restaurant hires. “Our kitchen is small and very demanding,” Robinson said. “Even people who showed up on time and did the job OK were still cut loose, because you just have to be really, really good. I'm sure it's a really hard to get a job right now. This economy really helps us, I'm sure, because there are a lot of good people out there who don't have jobs.” At Basketcase Gourmet Food Baskets and Treats in Highlands, owner Krysti Rogers said business has been up about 60 percent this year, and last year it was up 25 percent from 2007. She started Basketcase at home in 2006 and took a storefront in 2007. Last year she noticed traffic was down and analyzed what was selling the best and what wasn't. Then she adjusted some of the items she offers. “There were fewer tickets, but sales were up,” Rogers said. “What I found is that people were buying more of the gift items than the gourmet food items, and I'd much rather sell a $100 pendant than a $12 jar of pesto. You've got to go with what will keep you in business.” She also picked up a line of bath items and towels from another business that was getting out of the market, and that has boosted sales, too. While Rogers is enjoying success, she's quick to note that she's in an affluent, tourist-driven market where people still have discretionary dollars to spend on high-end items. The bottom line is flexibility. “You have to be open and willing to change direction in midstream if that's what your business is calling for,” she said. “In this market, you've got to be open to change. I found out that in my case people aren't necessarily looking for the cheapest price on everything; they're looking for value for the price.” Control that debt Rogers has two part-time workers who help in the busy tourist season coming up, but she staffs the store most of the time, which helps limits expenses. She did borrow money from her mother and from credit cards to open, but she's kept it at a reasonable level. At The Admiral, there are six full-time employees and six part-timers. Robinson said he and his business partner had most of the funds to open the restaurant but borrowed $25,000 through Mountain BizWorks to cross the finish line. Business owners have to do a business plan and crunch the numbers to be sure income will match their debt load. Being undercapitalized is one of the top reasons businesses fail. “That was perfect to get us there,” Robinson said of the $25,000 loan. “It wasn't an overwhelming amount that would be trouble to pay back. I really wouldn't want to get anymore than that.” | |
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