2009 Small Business Guide
small business
Managing a small business in a recession

To be sure, it may be possible to ramp up marketing efforts without doling out more money. "Thanks to the revolution with the Internet, there is an abundance of new ways to get your product into the marketplace without having to do the old-school media buy," Becker says.

Acquiring customers
In terms of increasing revenue, the artistic side of the income statement, as Siegel puts it, he and others have several suggestions. "In this climate, because big businesses are suffering, their quality might slip," he says. "There may be an opportunity to acquire customers unhappy with their existing providers."

Building loyalty among your own customers is crucial during a recession. "There are things that may not make you money immediately, but the economy will be more robust one day," Sloan says. "The more you ingratiate yourself with customers now, when they start spending freely, it will work out well for you."

He recommends providing freebies. "For example, if you're a consulting firm and have open hours, you may as well give them away. Customers will love you."

Choosing the right products to sell also can make a difference. That's because consumers often substitute a cheaper product for a more expensive one during recessions.

"For instance, people might cut back the number of steak dinners that they eat out," Shane says. "But because they still want to treat themselves, they increase their purchase of cheaper foods, like pasta."

One way to keep customers satisfied is approaching them after a sale for feedback. "See if they have any suggestions," says Ryan Peddycord, president of Resource Nation, a small business consulting firm in San Diego. "That opens more opportunities for sales to that client or referrals to new ones. People like to be heard, and not just in automated surveys."

New attitudes
As for the balance sheet, Siegel says the financial crisis has created new attitudes just like the Great Depression did. "Companies will become more cautious of leverage," he points out.

"Look at your capital base in relation to the economy. We're seeing with big companies that they don't have the capital to make it through a difficult situation. The first basic test you have to pass is will you remain viable?"

Experts point to several ways of raising capital. "The credit crisis is a crisis in the debt markets," Shane noted. "Sources of equity capital -- friends, family, business angels, strategic partners and venture capitalists -- are in better shape."

If your business has valuable assets, you can create capital by selling them. "You might find that you don't need to borrow additional money for growth if you, say, sell your trucks and lease them back," Shane says.

If you do need to borrow money, community banks may be a preferred source of loans. Since many of them didn't suffer from the subprime mortgage crisis, they often are more willing to lend than their bigger competitors.

If you're having trouble borrowing from a bank, you can try a more creative solution. "The best source of financing when banks dry up is accounts payable," Cloutier says. "You can get extra money by taking longer payment terms. So if you owe vendors $50,000, and you can expand that to $70,000, you just got a free $20,000 loan."


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