Small Business Survival: Overcoming the Recession and More

on January 27 2012 8:45 AM
3 – Flint, Michigan
Violent crime and bungled budgets put Flint high on the list. Reuters

Small business survival is about evolving to match the business with changing realities, said Karl Baehr, Director of Business & Entrepreneurial Studies at Emerson College.

Are You in Trouble?

The obvious sign a small business is in trouble and potentially facing an existential crisis is running low on cash, the lifeblood of all businesses without which they cannot survive.

Another sign is declining sales from a small businesses’ core market that cannot be explained by non-threatening reasons like seasonality, said Baehr.

Internal or External

Troubles can either come from a small business’ internal operations or changes in the market place.

If a small business’ comparable competitors are also struggling, the trouble likely comes from the market. If not, it may very well come from the small business’ internal operations.

Either way, the solution is to evolve and adapt to the market reality, said Baehr.

Staying in Touch with the Market

The key is to stay in touch with the market, said Baehr.

One of the most common mistakes organizations make is continuing with “business as usual.”

“They build a product just for the sake of building it. They don’t think about why anyone would want to buy it,” said Baehr.

Organizations, therefore, need to have the conviction to break away from their traditions and change to something that works.

Recession-Specific Advice

A prime example of refusing to adapt is small businesses not accepting the reality of the Great Recession, said Baehr.

For the past few years, many made the mistake of assuming the recession was temporary when in fact it was the new reality. Because of this faulty assumption, they continued with “business as usual” and went bankrupt.

One viable response to the new reality of the Great Recession is cutting costs. For labor costs, small businesses can lay off employees, reduce hours or negotiate a cut in pay, said Baehr.

On the revenues side, Baehr offered two suggestions.

In some cases, he recommends narrowing the market focus and really holding on to one’s strengths. For example, many radio stations that are currently doing well are those that confine themselves to very local markets, said Baehr.

In other cases, it might make sense to take a survey of the carnage in the industry. If there is a particular sector that suffered tremendous damage and has far fewer players remaining, it might make sense for a surviving small business to focus on that sector or expand into it.

The real estate industry is an example of this situation, said Baehr.

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