What are some important financial decisions that Business Owners face in a slowing economy?
It has been said, "solidly run small businesses actually hold their own during downturns." (Mark Vitner, a senior economist with first Union Corporation)
While all business owners would like to classify themselves as “solidly Run", Here are some of the thing that I believe warrant consideration by any business owner during a “slowing economy”
1) Should I Reconsider and/or revise the existing business plan?
One of the most important things you can do during an economic downturn is to evaluate your business plan. “All businesses need a plan to define where they are going and how they are going to get there”. (http://www.bizplanprep.com/)
Your business plan is the working base for your company. Have your current day to day operations led you to a new position in the marketplace? Or have you strayed from a successful formula? Should you write a new business plan? Should you reinforce the guidelines for the current business plan? Sit down and examine the plan from the viewpoint of an investor looking to purchase the company and make any revisions that seem appropriate.
2) What should I do with the budget?
In a downturn one of the first places many businesses cut expenses are in advertising - a real mistake. As part of the philosophy of expanding your base and recruiting more customers, you need to advertise and sell more than ever. People are looking for better ways to do business. If you have established strong customer satisfaction, this is the time to get the message out.
3) Should I start a power circle or an advisory board?
“Advisory Boards are being implemented by companies globally to leverage knowledge.”(http://partner-com.com/advisory.html)
Advisory boards consist of industry and community leaders i.e.: attorneys, certified public accountants, civic club leaders, owners or managers of businesses similar to yours or with whom you do business, also retired executives may be available. The latest industry jargon for these types of boards is "Power Circles." An apt name because the members should be power connections for you - knowledgeable about the marketplace in which you do business. These individuals should be able to provide you with the information that you need to make good decisions. The purpose of the board is to offer you a viewpoint other than your own. They should be people you can be truthful with and who will keep your disclosures private.
As with many small business owners they vision of their business usually only extends to their own abilities. They are driven and full of determination and believe their abilities will be able to sustain the business to success. Unfortunately, many small businesses lack the knowledge to be able to effectively be owners’ and leader’ to their organizations.
According to the U.S. Census Bureau, nearly forty-seven percent of all businesses employ fewer than ten employees. Small business is a vitally imperative to our nation’s well-being. Small business is responsible for creating the majority of our new jobs, employing nearly half of the American’s private workforce, and providing half of our country’s private non-farm gross domestic product (SBA 2009). Regardless of your politics, since President Barack Obama took office in 2008, an immense degree of emphasis has been placed on small business. Some of the emphasis has been positive while other parts have been negative.
There comes a time in a business owner’s career where they will be faced with the decision of whether to expand or to focus on other goals. Goals that focus on creating a healthy work environment, providing great customer service, and giving back to the community. There are a number of small business owners that have decided not to expand and have ultimately created small sustainable companies that are thriving in today’s market. Bo Burlingham discusses the principles of a “Small Giant” and the “mojo” that these small businesses posses in his book Small Giants. All of the businesses that Burlingham describes in the book are privately owned, and their primary goal is not the growth of the company but being the best at what they do for their customers. The principles discussed by Burlingham are relatable and useful when recruiting and selecting a sales force team.
New businesses will take longer to thrive with the United States falling economy. The faltering job market and the deepening slump in housing threaten to hurt consumer spending. Consumers are becoming more conscious of their spending and therefore using cash to pay for smaller necessary purchases. The cost of entertainment and other presumed luxuries may be pushed to the background by most families, when having to choose whether to pay for a bill or treat the family out. Thriving businesses will understand the need to provide a service or product at affordable prices.
It is a little known fact that small businesses make up a major factor of the American workforce. Since the word small is in the title most people think nothing of them, but when one takes the time to think that there are millions of small businesses, most with at least two to ten workers, the amount of people begins to add up. There are many factors that could contribute to a business failing, and it happens all the time in America. Small businesses must have solid business plans, a good use of technology, appealing merchandise, and appropriate financing to survive and prosper in the economy.
ii. The economy is said to be experiencing recession when demands for certain products and services shrink. When demand falls, the prices will also decrease. When this happens, companies will not be able to make a lot of profit. To survive in the industry, they needed to cut some of their staffs. During this period of time, the rate of unemployment is rising. When they do not have enough workers, the productions are not as numerous as during the ‘booming’ state. Because of the...
There are many responses that a company can have to troubling economic times. They can first weather the storm and survive. They can back up and get driven out of business, or they can grow. The economy has been in recession for many months. It is the job of our company to identify things that can help businesses to make it through these times and hopefully prosper.
In the 21st century, small and large, private and public businesses are all aiming towards economic growth. The small business marketplace is extremely dynamic and the changes are fast. Here are some facts from the US Small Business Administration on small businesses. There are about 30 million small businesses in the United States and employ just over half of the country’s private workforce. They employ a staggering 40% of high tech workers such as computer professionals, scientists and engineers. More than half of the small businesses are home-based businesses and two percent of them are franchises. One of the most important aspects is the fact that a majority of innovations in the United States come from small businesses. In 2008, there were 627,200 new businesses that started, 596,600 businesses that were closed and 43,546 companies that filed for bankruptcy. According to business experts, of all the small business startups, one-third of them are profitable and successful, a third of them just about break-even and the rest of them are down with negative earnings Some buyer’s develops as independent business owners, while others are more likely to prosper as franchise owners. According to a recent report by the Small Business Administration (2007), the United States had approximately 26.8 million small business firms in 2006. In fact, as recently reported by Moutray (2006), most firms in the U.S., are very small and account for about half of the country's non-farm real GDP. Over the past decade small business has generated 60–80% of new jobs annually. In reality, there are easy answers to the independent business versus franchise dilemma. Although, a franchise system offers benefits to owners such as brand recognition, to inc...
Economic conditions affect how easy or how difficult it is to be successful and profitable at any time because they affect both capital availability and cost, and demand (Thompson, 2002). If demand is buyout, for example, and the cost of capital is low, it will be attractive for firms to invest and grow with expectations of being profitable. In opposite circumstances firms might find that profitability throughout the industry is low.
Managers have a degree of choice in how they deal with their employees. (Purcell, 1987) Some may see them as a commodity while others may see them as an important and valuable resource needing to be developed. (Purcell, 1987) Managerial prerogative is defined by Bray, Waring and Cooper (2011: pg 332) as “those areas of decision-making within an organization over which managers claim to have an unfettered right to decide as they see fit.” It is important to define managerial prerogative so that we can establish whether the legislation has increased or diminished it. Defining managerial prerogative is also important as we look at the different managerial styles and strategies and observe if they play any role in increasing or minimizing managerial prerogative. Managers will always have some degree of control over their employees because most of the day to day tasks in the workplace such as rules and procedures of the workplace, tasks, and which employee performs which tasks are decisions made by the manager without consultation with employees and unions. (Bray, Waring and Cooper, 2011) The laws and regulations surrounding managerial prerogative have only seemed to rule in favour of employers being the sole decision makers in an organisation and decrease the amount of bargaining power unions and employees have towards pay and conditions. (Bray and Waring, 2006)
A successful business strategy will identify changes in the external trends in the market place. Plan out what the company’s future direction is. Set out the goals for the management team. It will identify a vision of where the company wants to be in the future. Keep all employees informed of the direction of the company.
The next purpose of the Business Plan is to allow the entreprenuer to view and evaluate the proposed businessventure in an objective critical and practical manner .The collpase of many business ventures can be attributed to the decisions and planning of thye entreprenuers who rely more on emotions and gut feeling rather than objective and rational considerations .With a Business Plan the entreprenuer has solid and well-grounded information to supplement the planning and decision making
Businesses trying to survive the current economic crisis need to pursue competitive advantages and empower them. Competitive advantage results from matching core competencies to the opportunities. The entrepreneur that I interviewed uses her experience, quality, consistency and overall learned what the customers really need and demand. Jane’s skills and experience enable her to respond faster to market changes. Jane has remarkable negotiation and sales skills that make her a most competitive in the market. There are also questions that you need to ask yourself to determine if you are ready to take the next step. Are you able to think of new ideas? Can you imagine new ways of solving problems? Entrepreneurs should think creatively. If you have ideas learn how take advantage of new opportunities. Be your own boss also means that you are responsible for making difficult decisions. The business world involves uncertainty. Do you avoid the uncertainty in life at all costs? If so, owning your own business is not the best option. Do you enjoy the thrill of taking risks? Then you are ready to enter the world of
The business plan will also be useful in facilitating the adoption of a strategy that will help the business prosper in the modern market. The plan will be a critical tool that will help in the production of a reliable strategy for attaining the goals and objectives. The proposed business plan will be implemented in three years time. Within the first three years, the business i...
Small businesses have a clear relationship with the economy in general, and if we take an example like the U.S. where over 86% of businesses ...