Ask SmallBiz: Succeed in a slow economy
Q. What types of businesses historically have done well in a slow-growth economy, and what kind of tips can you provide that will improve my chances for success if I want to start a business this year?
A. Historically, businesses that relied more on consumer necessity purchasing rather than on discretionary spending have weathered a slowing economy. These included businesses in: healthcare (physicians, physical therapists and veterinary services), public safety (criminal justice), accounting, funeral services, environmental sciences (green manufacturing), and maintenance and repair. Consider the following before starting a business at any time:
1. Planning counts! Experience is always important whether your business is thriving or struggling. If you don’t have experience in the type of business you want to start, work or intern first at a company in that field.
If you can afford it, consider a fee-based business consultant to review and help you with your business plan and sales and cash-flow projections. If your budget is tight, contact Score. This is a nonprofit with 10,000 volunteers that has a contract with the U.S. Small Business Administration to help businesses succeed. Score is comprised of retired business owners and has counselors who will help you. You can reach them at www.score.org or at (808) 547-2700. Another option is to talk to a banker. Bankers have great ideas to share.
2. Mind your business
In addition to operating a business, owning the business has its own issues. You can be a successful manager, but if you can’t collect your receivables and don’t know how to pay bills and taxes on time, you’re better off working for someone else. This is hard work, and money should not be the only reason you want to start your own business.
3. Have a solid cash cushion
You will make mistakes. It could be losing staff due to noncompetitive wages, paying too much for supplies and inventory, not being paid by clients, or paying penalties and interest to the state and IRS on taxes due. Given the protracted slow-growth period, you should have two to three years of cash to cover your expenses or have access to that money. When it comes to your business, it’s important to remember:
Plan your work, then work your plan;
Find stable, reliable sources of cash flow; that is, financially solid clients with whom to do business;
Have passion, because you will need it in the most challenging times; be humble enough to hire help for those tasks you are not competent to do; and be willing to listen and learn, whether it’s from your customers or advisors.
By Kevin Kaji – Bank of Hawaii