How Small Businesses Can Survive Through 2010

Jonathan Weber, The Big Money

Last year was brutal for small businesses, and 2010 promises to be only marginally better. We’ll have to live with “survival as the new success” for a while longer—so here are 10 tips on how to make it through the lean times.

Take advantage of government programs. While small-business owners are often rightly cynical about the government being here to help, the bailout era does include something for everyone. The stimulus package is still pouring money into construction projects. The Small Business Administration has sweetened its loan programs. Investment-incentive schemes such as the obscure New Market Tax Credits program are steering money to certain areas and industries. And make sure your accountant is on top of the numerous, new tax breaks available to small companies.

Think creatively about financing. Bank lending is not going to get much more liberal this year, but there are some alternatives. Consider using a factor or some other form of inventory financing if you’re in that type of business. Peer-to-peer lending via the Internet is starting to take off, and can be a smart option for small sums if you have a good credit rating. Foundation grants are also a possibility for some types of projects, though the process can be very time-consuming. In general, credit-card companies won’t be easier than banks, but some of them offer deferred payment plans that can help with cash-flow issues.

Manage your payables and receivables aggressively. The best way to maintain good cash-flow is to collect quickly and pay slowly. A combination of carrots (a small discount on the bill) and sticks (high interest rates on outstanding balances and a quick cut-off of credit) can help bring cash in the door more quickly. On the flip side, try negotiating longer payment terms with your vendors. They may not like it but they could be eager enough to keep the business that they’ll work with you.

Negotiate your rent. The commercial real-estate business is in a terrible state, and that can be a good thing for tenants. If you’re paying 2005 rents, you should be able to cut your bill—either by relocating or by threatening to do so.

Use barter. Trading for goods and services is more trouble than it’s worth in good times, but when things are tight it’s worth taking another look. If you own your business outright, consider trading for personal services (the dentist, the gymnastics class for the kids) that you would be spending money on anyway.

Cut your energy costs. Most businesses can save some money by taking basic energy conservation steps such as low-energy light bulbs and proper weather stripping; many utilities offer a free audit to identify easy savings. If your building is truly out of date on energy efficiency, you might also qualify for the federal government’s weatherization program (part of the stimulus package).

Consider furloughs or voluntary unpaid time off for employees. Staff is the big fixed cost for most businesses, and layoffs are a last resort. But sometimes employees will be happy to take some time off, and even if they’re not, a temporary layoff or furlough can be the best solution all the way around.

Shop around on telecom. Phones, cellphones, and Internet connections can be a big expense these days, but there is now more competition than ever. The variety of options can be bewildering—the cellphone carriers in particular seem to be making an art of impenetrably complex offerings—but if you put your mind to it you may be able to save real money.

Look twice at your insurance policies. On the one hand, it can be dumb to go without basic business-liability insurance at a minimum. But it’s easy to find yourself with redundancies in your insurance coverage, and if your business is close to the edge there’s not much to insure anyway.

Work the social networks. As I mentioned last week, Facebook and Twitter are probably the two most significant developments in the Internet and media worlds since the advent of Google in the late 1990s. That doesn’t mean they are a quick fix for anything, but they do represent a huge—and potentially hugely cost-effective—marketing opportunity for many types of companies.

Jonathan Weber is the founder, publisher, and CEO of New West, a media company covering life and business in the Rocky Mountain West.