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Survival tips for small businesses

Know the Score

Posted: November 7, 2008 8:17 p.m.
Updated: November 8, 2008 4:30 a.m.
 
You may be in Mail Order, Direct Mail, or you may be a local merchant with 150 employees; whichever, however or whatever — you’ve got to know how to keep your business alive during economic recessions.

Anytime the cash flow in a business, large or small, starts to tighten up, the money management of that business has to be run as a “tight ship.”

Some of the things you can do include protecting yourself from expenditures made on sudden impulse. We’ve all bought merchandise or services we really didn’t need simply because we were in the mood, or perhaps in response to the flamboyant advertising or the persuasive salesperson. Then we sort of “wake up” a couple of days later and find we’ve committed hundreds of dollars of business funds for an item or service that’s not essential to the success of our own business, when really pressing items had been waiting for those dollars.

If you are incorporated, you can eliminate these “impulse purchases” by including in your by-laws a clause that states: “All purchasing decisions over (a certain amount) are contingent upon approval by the board of directors.” This will force you to consider any “impulse purchases” of considerable cost, and may even be a reminder in the case of smaller purchases.

If your business is a partnership, you can state, when faced with a buying decision, that all purchases are contingent upon the approval of a third party. In reality, the third party can be your partner, one of your department heads, or even one of your suppliers.

If your business is a sole proprietorship, you don’t have much to worry about really, because as an individual you have three days to think about your purchase, and then to nullify that purchase if you think you don’t really need it or can’t afford it.

While you may think you cannot afford it, be sure that you don’t “short-change” yourself on professional services. This would apply especially during a time of emergency. Anytime you commit yourself and move ahead without completely investigating all the angles and preparing yourself for all the contingencies that may arise, you’re skating on thin ice.

Regardless of the costs involved, it always pays off in the long run to seek out the advice of experienced professionals before embarking on a plan that could ruin you.

As an example, an experienced business consultant can fill you in on the 1244 stock advantages. Getting eligibility for the 1244 stock category is a very simple process, but one with tremendous benefits to your business.

The 1244 stock encourages investors to put equity capital into your business because in the event of a loss, amounts up to the entire sum of the investment can be written off in the current year. Without the “1244” classification, any losses would have to be spread over several years, and this of course, would greatly lessen the attractiveness of your company’s stock.

Any business owner who has not filed the 1244 corporation has in effect cut himself off from 90 percent of his prospective investors.

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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