Managing a small business in any field is quite a challenge for any business owner, regardless of the business activity involved such as retail, manufacturing, distribution or other services related tasks. Small businesses especially need to be nimble and quick to react to changes in the economic scene, since cash reserves and fall back nets are usually slim for such entities. While it is relatively easy to operate and manage such small businesses in good economic times, the steps needed to manage small businesses during a bad economy are quite different. In this brief article, we will explore some of the things that the small business owner can do in a bad economy in order to keep the business afloat and survive until the good times return.

The best time to prepare for bad economic times for any business is when it is thriving and economic times are good. The old adage of make hay while the sun shines cannot be overemphasized. Even in nature, squirrels store food in the summer in preparation for the winter months. Hence in business, as in nature, companies and businesses need to prepare for bad economic times during the periods of healthy growth and prosperity. The biggest mistake that small business owners do is to cut down on marketing expenses when troubled waters are reached. Marketing and sales are the heartbeats of any business and cutting down marketing costs will end up producing less sales and this in turn leads to lower revenues and thus the downward spiraling will continue until the business itself may go bankrupt. Hence during bad economies, one should not touch the marketing and sales efforts and budgets. Next, the key step to be taken is to reduce the price of your goods and services to below what your competitors charge. Note that during bad economic times, customers get very sensitive to price structure and usually shop around to find the lowest price for everything that they purchase. Hence if your price is higher than that offered by your competitor, business will simply shift to them. You need to keep prices as low as possible. This will reduce your profit margins but then by dragging away sales from your competitors over to your firm, the profit margins may be lower but by way of increased volume, your final bottom line may actually grow if not at least remain stable. Pricing structure during bad economic times is a very important factor that cannot be overlooked. Another critical factor to be addressed is the accounts receivables area. During bad economic times, many customers will default on the payments of their purchases because of credit problems. You cannot afford to have non paying customers and hence you need to strictly institute payment terms. This may be a tough pill to swallow, but better swallow this pill than go bankrupt. Next spend more on giving away small bonuses for referrals to customers. Word of mouth referrals and marketing is the best way to get customers to your door and more customers means potentially more sales. Get as long a term as possible to pay your own suppliers because short term notes and credit will create a drain on your own cash flow management. This is the main reason why you need to take care of suppliers during good times because you may end up needing their help during bad times. These are some of the things that small business owners and managers can do to survive during periods of poor economic activity in order to allow their business to stay afloat until the good times return.

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