Now that the economy is starting to turn around, 2011 promises to be a better year for small companies who have been struggling to save financially solvent. Where I live however, consumer spending still seems to be down which means small companies must tread lightly as they reposition themselves for growth.
1. Clean up your credit. Our small business took quite a hit in 2008 and our credit score suffered as a result. Even though we had been making or payments on time, we had too high of a debt to loan ratio, and too low of an income for the amount of debt we had. If this scenario sounds familiar to you, cleaning up your credit means doing what it takes to pay down existing debt. This includes accelerating payments of credit cards, refinancing your home and borrowing against other assets.
Improving your credit score puts in you in position for borrowing money for construction loans, inventory, or other business expenses. With only 1 in 10 people qualifying for any kind of loan these days, small business owners with excellent credit will find that borrowing operating cash will be relatively easy.
2. Lower your overhead. Year end is a great time to take a good look at ways to drastically lower your month-to-month expenses. Moving into a smaller office space, trimming supply costs, working longer hours and doing more of the work yourself are all ways to lower operating expenses. The extra cash freed up by this business strategy puts you in a great position to start the new business year without the worry of having to cover too high of an overhead.
3. Keep a very close eye on consumer trends. Consumer spending has changed with people ~ now more than ever ~ erring on the side of caution. Luxury items are tough sells right now, with the trend leaning towards modestly priced goods and services. In our area, small businesses who offer a reasonably priced product combined with excellent customer service are continuing to remain solvent while other businesses are collapsing around them.
Before saddling yourself up with inventory, take a really close look at what type of inventory is moving and what isn’t…..and don’t be afraid to ask your wholesalers and vendors what merchandising trends they’ve been noticing.
4. Be flexible and willing to adapt to change. When we started our small business in 2006, we targeted a specific niche that we felt had potential. Unfortunately as the economy collapsed, so did this particular niche market. Positioning ourselves for growth in 2011 means evaluating what the market wants and being willing to make that change even though it means veering away from our original dream. A willingness to adapt and change with the market is what will position any small business for positive growth in 2011.