Published on 02/27/2008

It’s been seven years since the nation’s last recession, and some analysts fear the U.S. is again entering an economic slump. Recession is a worrisome subject for small business owners, but Better Business Bureau (BBB) has some time-tested advice to help small businesses stay afloat and weather the storm.

Considering the downturn in the real estate market with foreclosure filings rising 75 percent from the previous year to 2.2 million, a financial services sector that lost 13 percent of its market value in 2007, and some regional unemployment rates well above the five percent national average, some areas of the country are already experiencing their own recession.

For small businesses, indicators of an economic downshift will include lower sales, but could also be potential customers and partners taking longer to negotiate and sign contracts or taking more time to pay. Maintaining cash flow is critically important. Small businesses need to find ways to control expenses, get lower interest rates on existing loans, liquidate inventory, and provide solutions for customers who are also feeling the pinch.”

Here are some BBB tips on how to position your business during a recession:

Cash Flow is King

Cash flow is the key to surviving a recession. Small businesses should look at all of their margins, including payroll, marketing, rent and supplies, and must be active in pursuing accounts receivable. Also, with interest rates dropping in recent months, small business owners may want to consider re-financing on existing loans as a means of generating or maintaining cash flow.

Marketing Budget

For many small businesses, marketing is among the first items to be cut back or eliminated when a recession hits. However, this might not benefit your business. Think hard before trimming the marketing budget at a time when your firm may need to be prospecting for new customers.

Sales Strategy

Many owners may find that their best prospects for new revenue are existing customers and clients. Tap into established relationships and your knowledge of a client’s needs, with a goal of finding solutions to keep current customers satisfied. See: March 11 BBB networking breakfast program - “Warriors for Customer Loyalty” - at Saks Fifth Avenue. Click here to see details about the program, costs, and to register online.

Pricing Strategy

Products and inventory must move to generate cash flow. Small business owners should consider pricing strategies to liquidate old inventory. Cutting prices, bundling products and providing deals may be necessary to attract customers and sell old or slow-moving merchandise.

Customer Feedback

Customer feedback is critical during economic slowdowns and customer satisfaction should be a top priority in a recession. Owners need to find out how customers might respond when things slow down, what will they want and need, and then be prepared take action to provide those products and services. Keep an eye on your record with the BBB for helpful insight into the customer experience with your firm!

Keep an Eye on the Competition

The small business landscape is extremely competitive. The BBB is recommending that owners keep an eye on, learn from, and be prepared to respond to what competitors do during periods of recession.