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How To Grow Your Business With Tight Budget Constraints
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Business New Haven
11/11/2002
By: Anne-Marie Brungard
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With the current stagnant economy, consumer confidence sagging and retailers predicting lower than usual sales for the holiday season, some companies will be happy just to survive. In what we all agree is a new economic era characterized by rapid and unprecedented change, we face challenges unlike any we have encountered before. For your particular industry it is more important than ever to be aware of the current marketplace and the conditions that impact your business. Those companies considering growth at this time should consider the following:
For starters:
Competition – Finding out what your competitors are doing during these times may assist you in the decision-making process. Where are your competitors cutting back? What additional expenses, if any, are they making? Are they discovering new or emerging markets? What technological enhancements are they using?
Customer Base – A diversified customer base is essential. Relying heavily on one or two key clients could spell big trouble if anything changes. In some instances losing a client or two can devastate a company. Identify your key customers and find a way to duplicate successful sales techniques. Develop a plan to broaden or strengthen this area if necessary.
Capital – Consider term loans for working capital purchases and a line of credit for working capital needs. Lenders are offering reasonable interest rates – it is a good time to develop the relationship with your banker. A banker who understands your particular business and its special needs can provide practical assistance.
Counsel – Upon completion of your month-to-month cash flow projections, speak with your business advisors. The projections must be realistic- an outsider will be able to review from a more critical and conservative viewpoint. Your accountant, banker, insurance agent and attorney are key sources of information and advice. Outline your plans in the very early stages to take maximum advantage of feedback.
Caution – Expand your business in the most cost effective way. You may have to explore several potential strategies to achieve this. Planning is vital. Take a long, hard look at the current quality of your production, product or service. Can your management capacity and employee capability handle the expansion? You need to know that if you commit to increased spending or capital improvements that you will see increased cash flow.
Belt tightening and growth strategies:
Cash Flow – You need to have enough cash reserves to help your company get through this period of growth. Use your cash flow creatively to help the business grow. Expand in the most cost effective way. Can you purchase new equipment to develop your product at a higher level with less manpower? How can you use what you have to improve production and minimize chances for losses?
Capital Expenditures – Many companies are postponing capital expenditures until the economy appears to be on stronger footing. Keeping a careful eye on all expenditures may reveal some areas that can be cut back or even eliminated to spur some growth within the company. Extravagances like larger or higher end office space may not be essential to the bottom line, and reducing expenses here can positively impact the business.
Contacts and Contracts – This is the time to take advantage of the buying power of your trade groups or local chambers of commerce. Many offer buying discounts and incentives, lower cost health insurance and more. This is not the time to be complacent. Check the competition – can you re-bid insurance contracts, thereby reducing rates? There is strong competition for your business too, get aggressive in seeking out deals on equipment and other purchases, and don't forget those service and rental contracts.
Cutting & Investing in Human Capital – Downsizing is prevalent. While some companies have to cut back on personnel expenditures, others are holding the line - but are definitely not committing to adding new staff. Assess your staffing capacity and the potential for using temporary staffing. Improvements in technology are always a good idea, so too is improving the skills of your workforce. Explore creative strategies to improve production and morale, harnessing the maximum potential of your human resources
Critical Assessments – Make a critical assessment of what you are spending. Asking the hard questions. Will your spending give way to increased productivity? If not, why are you doing it?
Cutting Edge Marketing – In order to thrive and not just survive, consider that this is not the time to eliminate your marketing budget. Your customers have to know who you are, and your message must be delivered in a clear, creative and precise manner. Maintaining contact with your customers can go a long way to ensure that your customer base is as secure as possible. Consider word-of-mouth (network) marketing and other low-cost approaches to generate business.
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