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Council of Better Business Bureaus ®
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Council of Better Business Bureaus
How Small Businesses can Weather a Recession
July 27, 2010

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,” said Steve Cox, spokesperson for BBB. “Maintaining cash flow is critically important, and small businesses will need to find ways to control expenses, find lower interest rates on existing loans, liquidate inventory and provide solutions for customers who are also feeling the pinch.”   

Regardless of when a recession hits or how long it lasts, BBB is offering advice to help small businesses best position themselves during a recessionary period.

Cash Flow is King
Cash flow is the key to surviving a recession, and small businesses must 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, BBB suggests that small business owners may want to consider refinancing 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, BBB recommends thinking hard before trimming the marketing budget at a time when a small business may need to be prospecting for new customers.

Sales Strategy
Whether a small business adjusts its marketing budget or not, many owners may find that their best prospects for new revenue are existing customers and clients. BBB advises owners to tap into established relationships and knowledge of a client’s needs, with a goal of finding solutions to keep current customers satisfied.

Pricing Strategy
Products and inventory must move to generate cash flow. BBB is counseling small business owners to consider their pricing strategies in order 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 the Competition
The small business landscape is extremely competitive, and BBB is recommending that owners keep an eye on, learn from, and be prepared to respond to what competitors do during periods of recession.

For more sound advice from BBB on helping small businesses survive and even thrive during hard times, visit, www.bbb.org.

BBB is also proud to be a partner with IBM on the Small Business Toolkit – offering software, forms, training, and more to help small businesses grow and succeed. To access the toolkit on the Web go to: www.us.bbb.org/ibmtoolkit