If you have invested in stocks, chances are like me, you’d be having a heart attack when looking at your portfolio. My cure is simple: just don’t look at it right now. When things go down, it always go up — maybe not next month, but next year or so. Hopefully.
Congress has just rejected the $700 billion financial bailout package and the stock market plunged 777 points, the worst sell off since 9/11 attacks. WashingtonPost.com has a breakdown of the final bailout bill while the Heritage Foundation has a good initial review of the bailout agreement. It’s a scary world out there, moreso for those who have been hit hard by this housing and financial crisis. President Bush’s address to the nation regarding the bailout package was the first time I listened to him in a very long time without switching the TV to home makeover shows on HGTV instead.
As a small business owner, what are you supposed to do during this time of financial crisis? Here are some thoughts:
- Hold on tight. Breathe. Keep calm and be positive. And if I may repeat my point above: while things look bleak today, things will be better tomorrow.
- More importantly, hold on to your cash. With banks tumbling one after the other, credits are tightening everywhere. To get any type of credit, you need more equity, assets, collateral and downpayment. Keep a close eye on your cashflow and preserve your cash. As the failed giant companies have shown, liquidity is important and if you run out of cash, then you’d be in big trouble. For example, if you have the option to lease, lease instead of buying. You need to have cash now.
- Improve your balance sheet. Decrease your receivables and go aggressively to collect on those non-payers. Assess your inventory and plan how to turn them into cash if you cannot sell them. If you will need financing, consider alternative sources of financing instead of commercial credit.
- Reduce your fixed costs. Now is the time to review your expenses and cut on unnecessary spending. Find deals everywhere — barter, negotiate, ask for a discount and don’t pay for the full price. Run as lean as you can.
- Keep a close eye on opportunities for this market. In a depression, it’s an entirely different world, but it doesn’t mean that there are no opportunities out there.
- Take note how this downturn is affecting your customers — and determine what can you provide them. You may have some products that you can repackage or market differently to suit the current market conditions.
- Review your business model. Is the market for your existing products shrinking? Or are there products that may be needed when the market starts to rebound? Revisit your business plan (if any) and take this time to reassess the direction of your business.
- Market, market and market your business. Now is the time to pump up the marketing. Use guerrila marketing techniques to save on your resources and grow at a fraction of the cost. Find ways you can advertise your business without going bankrupt yourself. Find cobranding partners. And yes, market to your existing customers by giving top quality service so they can spread the word about your business.
- Develop multiple streams of revenue. Like stock portfolios, diversification can help you weather downturns in the economy. Determine if there are opportunities to earn from referrals, advertising, product sales, leads for traditional follow-up, and information. If you have a retail store, think of what else can you sell in your store that customers would want.
- Start preparing for the turnaround. Keep an eye for the future. Things will be better, and when it does, you need to think how you can take advantage of the better economic environment. You need to be prepared NOW when the market is still in the doldrums; instead of thinking how to take advantage of the opportunities when the market is already starting to recover (you’d be left behind).