Small and family businesses are facing tough challenges from the economy’s slowdown, but they can weather the downturn by considering 10 business-boosting strategies, according to the small business unit of Massachusetts Mutual Life Insurance Co. (MassMutual).
“This is a time when business owners need to re-examine what they’re doing in today’s economy while also preparing plans for tomorrow’s rebound,” said Beth Woods, Vice President of Business Owner Advocacy for MassMutual. “While this is no doubt a difficult market we face, it also can be a time of opportunity for business owners who act strategically.”
Here are 10 business boosters that business owners can consider as they respond to current economic conditions:
1) Revisit bank and credit card fees. Re-examining processing fees can help a business find more competitive rates. “A savings of even a few cents on every sale can help in a big way,” said Wood.
2) Shop for overhead services. Review the cost of overhead services, such as payroll and printing, to determine if the company can save by switching vendors or negotiating more favorable pricing or additional services from the existing ones.
3) Lease instead of buy. Leasing equipment enables the business owner to hold onto cash while still growing the business. Leasing also enables a company to update its equipment more easily, for example, when new technology emerges.
4) If stuck for credit, consider tapping whole life insurance policy’s cash value. Many businesses hold whole life insurance policies for a variety of reasons, including key person insurance, succession planning, and buy-sell arrangements, among others. At times such as these when credit is tight, a business can take a loan from its whole life insurance policy’s cash value. The policies continue to receive dividends which, although not guaranteed, can increase the policy’s death benefit (if they are used to purchase paid-up additional insurance or term insurance available through a rider) and cash value or offset some or all of the premiums due. If no policy already exists, businesses might want to consider buying one now to address strategic planning needs while creating cash value that they can tap during the next credit crunch.
5) Diversify into a complimentary business. A bad economy often causes business owners to retreat into their core business, but in doing so they might be missing a chance to leverage their existing infrastructure. For example, a coffee shop owner might be able to grow revenues by launching a catering business. “Sometimes, economic downturns present new opportunities,” said Wood.
6) Determine the value of the business. Undertaking a business valuation is an important but often overlooked part of strategic business planning. Knowing how much the business is worth – and what it can bring in sale – is important for a host of reasons, not the least of which is preparing for a sale, whether desired or necessary.
7) Add voluntary benefits. Because voluntary benefits are paid for by the employee, they can be offered at little or no impact to the business’ bottom line. And, because the programs are offered through the workplace, employees typically receive a discount from the provider, meaning they pay less than they would have had they obtained the benefit outside of work. “For example, employees value having access to discounted supplemental disability income insurance, which helps them protect themselves against income loss due to injury or illness. It’s a very cost-effective way to reward your people,” said Wood.
8) Develop an exit strategy and succession plan. This is particularly important if the owner is approaching retirement and counting on the sale of the business for retirement income. “If the economic downturn is long-term, you need to have these plans in place and be ready to execute any of several planned options, such as selling the business outright or taking on a partner until the economy rebounds,” said Wood. “An experienced financial professional can help you put a succession plan in place.”
9) Find a financial professional with experience in serving small businesses. Working with a knowledgeable and experienced planner can help business owners lay better plans for the future, both professionally and personally. For example, a knowledgeable planner can help a business owner develop a retirement plan and address personal planning issues that can protect the owner’s family and loved ones.
10) Understand family business dynamics. If the company is a family business, consider working with a planner who has the Certified Family Business Specialist (CFBS) designation. These planners have received special, rigorous training from The American College that equips them with expertise in serving family business owners and their families.