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• Surviving Recessionary Blues In A Shakey Economy

Surviving Recessionary Blues In A Shakey Economy

written on March 18, 2008 by Marsha Powers

With last weekend's news on the Bear Stearn's meltdown, many small businesses are rightly concerned about how to best protect their business and personal assets.  Added to this, elections, other market corrections, the US dollar getting beat up by the Euro and you may be reaching for an headache pill.   Even if your company is doing well, you are probably now having the "What if?" blues for the next six to nine months.    Here are ten simple, but essential, guidelines to use to protect your business and personal assets in an uncertain economy:

1. Personal credit scores - Personal credit scores impact how  much you will be charged for for most major purchases you face, including credti cards, health insurance, auto insurance, bank loans for business and home. This is the Achilles heel for many small businesses looking for capital with banks. Check your personal credit scores every quarter to make sure they are as accurate as possible. Banks do use them. Especially now. Especially to back away from lending money to a company they don't want to lend to. Credit scores affect virtually everything -from home, auto, health insurance premium costs to the very important bank review requirement when securing money for your business.  If there is inaccurate information- CORRECT IT NOW.  Go to https://www:freecreditreport.com to get your three crdit reports and suggestions on howe to improve them.

With all the issues we face including identity theft, inaccurate entries, this step is a must.  And with the ease of  pulling your credit report on the internet today, there is no reason to not keep your report up-to-date.   The cost for all three credit reports range from twenty to thirty-nine dollars.

2. Health credit scores - Pay all health care premiums on time. To make credit scoring even more complicated for you, a new industry is emerging and will challenge your availability to business credit. Software tracking programs ares now being developed to track your health insurance premiums payments by groups like Fair Isaac and will report information to the three credit bureaus. Your personal credit score will be lowered if premiums are not paid on time- lowering personal credit score- thus decreasing business and personal credit availability.

3.   Pay bills on time - Pay all personal and business bills, credit cards and loans on time to keep credit score healthy. If having difficulty, contact the sources and establish a bill payment plan.  Now. 

4.  Restructure personal and business debt - Review at all personal and business debt to determine what can be consolidated to get better terms and rates.  Set up a specific plan schedule to pay down old debt in order to be in a better position to secure new debt if needed. This action will raise your credit scores by as much as 25 points on your FICO scores.

5.   Review all overhead expenses, re-negotiate and reduce - Cash flow is essential in sustaining any business.  Best way to create cash is to reduce creeping overhead by re-negotiating with current vendors or move to more favorable vendors.  Review all overhead expenses and compare with comparable companies, especially telecommunications, heating, electric, leases, auto and health insurance policies, office supplies, shipping costs and even office space lease or mortgage.  Do this for your home also.  You will be surprised that you may be able to save up to 10 to 15% in your overall expenses.

6. Do not sell off investments for fast cash - This is retirment suicide.  There is a tendency to tap into an owner's retirement or investment plan when cash is needed for their business. Don't do this. This is a very expensive mistake. First, many portfolio values have dropped since this past September and may continue to drop for the next several months. Second, by keeping your portfolio in tack, when the market comes back, your money will be working for you again and earning money for your retirement years. Look at other ways to generate cash. Three, keep your portfolio diversified.  If you have a significant amount of money in a former employer's 401K plan, for example, when the stock is high, which may not be right now, consider divesting the portfolio further.  Remembe what happened to Enron employees 401K Plan?

7. Delay signing for large purchases until financing has been secured- Until you are absolutely certain you have sustainable business growth for the next twelve months to two years, hold off making large purchases. What is sustainable? Signed client contracts to cover large investment. Approved money in the bank before finalizing your purchase. There are too any instances when a company is promised funding, makes a significant purchase, hires more people or moves into a larger space, usually requiring a personal guarantee and the money does not come through. Or, your client's business hits a bump, does not need all the products and services you thought and your firm is stuck with a major purchase. You may want to consider a phased plan, with the clients' support.    Sit down with your clients and review options.  Defaulting on loans will make it extremely difficult to get new financing for the next five to seven years.  Credit will probably continue to be extremely tight for the next two years in general for most everyone.

8. Need more capital? - With all of above checked and still need money, approach lending sources, angel investors, private equity and other funding markets with the understanding that they are looking for very clean deals right now that have little risk. Have a precise executive summary, with realistic expectations on your needs and how you plan to re-pay the debt. It is strongly recommended you contact funding sources who have significant knowledge about you, your firm, and industry to help mitigate any risk.

9. Re-invent yourself ---Seize new opportunities for your business - In times like now, new markets are always created to help address the economy's needs. Can your firm morph into something new? Create new partnerships with like-minded companies? New ideas are the most successful at this time when you can demonstrate you can fill a very important void.

10. Seek assistance before need it - To sleep better at night, be proactive. Get involved with economic and entrepreneurship development groups familiar to your company's industry. Build upon these network think tanks. Seek out organizations that help build entrepreneurial businesses including Greater Cleveland Partnership, COSE, Magnet, North East Ohio Inc incubators, NEOSA and TechLift to university groups like Cleveland State University, Kent University, Case, Tri-C Corporate College and John Carroll University. Don't forget the very important support available from the State of Ohio and the Small Business Administration northeast Ohio offices who can direct you to programs your business may be able to access - ranging from job re-training, funding and developing new markets, including selling into international markets. All of these groups are available on the internet to review services offered.

 

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About the author: Marsha Powers is president and CEO of Powers Financial Group Inc @ www.powersfinancial-group.com