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Maureen Stephenson: Now’s the time to recession-proof your skill set

Know the Score

Posted: March 27, 2009 8:47 p.m.
Updated: March 28, 2009 4:55 a.m.
 

Now that all the debate about whether we're in a recession or not is over, it's time to keep business afloat.

Entrepreneurs and small business owners tend to panic when they hear the "R" word, but there are ways to "dig in your heels" and survive. The important thing is not to let your brain get numbed into a state of immobility.

Small business companies are more agile than giant corporations, and they can move rapidly to cut costs or switch strategies. They can also hire experienced employees laid off by bigger firms that wouldn't be available in an upmarket. You might also be able to step in to supply outsourcing services to larger businesses.

There are still opportunities for those who know how to take advantage of them. Here are some tips to help weather the storm:

n Focus on selling "necessity-based" services or products. Even in a down market people and businesses need the staples like computer services and food and trash collection.

n Sign-up a few "big" customers at a discount. Many entrepreneurs can cover their overhead with one or two big contracts, so it's worth it to give these customers a break.

n Minimize your full-time staff. Use them, or hire part-time people or outsource some of your work. Sources like www.guru.com can help you find freelancers to handle overflow work so you don't have to invest resources in payroll or employee benefits.

n Get tight with the budget. No reason to buy brand new furniture for example when you can go to an auction to outfit your office.
With the banks holding on to their funds and acting like credit was coming out of their personal pockets, you may feel that you have no access to funding. Don't let that put you off the hunt for capital help. With persistence and creativity you can still find financial help.

Try these ideas:

n Seek a "microloan." Small businesses with good credit have a fair shot at getting a small line of up to $50,000 from a micro-lender. This is true even if a traditional bank has rejected you, and many of them require a "turn down" letter from the bank.

n Use your assets. As banks have pulled back on lines of credit, asset-based lending has become popular. You can secure a line of credit against eligible receivables. The lender fronts you 85 percent of the total, then forwards the remaining 15 percent after your customer pays in full. You'll probably pay 1.5 points to 3 points over prime for the advance because this is done for companies that don't have the greatest creditworthiness. But let's face it - when you need the money, you need the money.

n Turn to the Web. For a small amount of working capital try this new concept of peer-to-peer networking which marries lenders with borrowers online. Some to check out are: www.prosper.com , www.lendingclub.com, and www.loaniio.com, allow you to search for lenders of up to $25,000 with three-year terms and widely ranging rates.

n If you happen to have good credit and a profitable business then shop the big banks. There may be some who are still business-friendly and haven't been caught in the mortgage meltdown.

n
Sweet-talk your vendors. After all, it's to their advantage to keep your business going and they'll often work out a payment structure to help clients over rocky times. This will ease the cash-flow burden and if you can show the vender your profitability, they'll take a
chance on you.

It all comes down to smart business when you look at it, and this is true for established companies as well as start-ups. Be prepared, as the Boy and Girl Scouts say, and you stand a good chance of being a survivor.

Maureen Stephenson is a local author and owner of Santa Clarita-based REMS Publishing & Publicity. Her column represents her own views and not necessarily those of The Signal.

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