Expert offers business advice during recession
Running a business is never easy, and it is even more difficult during an economic recession.
William Katz, University of Kansas Small Business Development Center regional director, talked to audience members at Thursday’s Basehor Chamber of Commerce meeting about how to run a successful small business. He provided some information that he said was vital to developing and maintaining a small business.
Katz said that small businesses were extremely important to the nation’s economy. Such businesses provide jobs, revenue and growth opportunity to cities.
“Mark my words, small businesses will be the ones that get us out of this recession,” Katz said.
Katz had three key pieces of advice for those trying to establish a business and keep it afloat: Practice cash flow management, never stop selling and understand change.
One of the mistakes that business owners make, Katz said, is mismanaging cash flow. He said that owners needed to keep in mind businesses can and do run out of money.
“Once you run out, you’re done,” Katz said. “If you can’t put out payroll, you’re done. It’s over.”
He recommended that small businesses spend money on things like technology, customer service, hiring and marketing. He advised against shelling out money for fancy furniture, rent and useless gadgets.
Part of keeping cash flow in check is also establishing a solid line of communication with the business’s credit facility, Katz said. He encouraged owners to initiate conversation with their bankers.
“Don’t wait for them to call you,” he said. “If you’re late on a payment, if you’re running behind, bankers can do a lot for you, but they’re less willing if they have to call you.”
An effective way to approach late payments, he said, is to create a set procedure for such payments and for accounts receivable. Katz said that scrounging for funds at the last minute was a terrible situation.
“Don’t fall into the trap of dialing for dollars when you need them,” Katz said. “You have to follow procedure to make sure you have your money when you need it.”
Managing inventory is another way that small business owners can control cash flow. Katz said that many businesses spend too much money on inventory. He suggested rearranging inventory schedules to make sure that no money was wasted on unnecessary inventory and that customers were still seeing new items.
Selling the product is essential for success. Katz said that one of a business owner’s highest priorities should always be the top line, revenue earned. He said owners needed to set goals, create milestones, and most of all, communicate within the company.
“Everyone in the business should know the revenue goals and if those are being met,” Katz said. “It’s such a mistake to not inform people. If you all of a sudden need to change things or lay people off, no one knows why, and they feel deceived.”
To ensure consistent revenue, Katz said the focus should be on the organization’s competitive advantage.
The secret to a sustainable competitive advantage, Katz said, is effective marketing. He said businesses needed to examine the efficiency of marketing before cutting back.
“Always ask people how they heard about you,” he said. “It’s so simple, but it tells you a lot. It tells you what’s working. Whatever’s working, do more of it. Whatever’s not working, throw it out. That’s how you save money and make money.”
Katz said that small business owners needed to remember that nothing stays the same. He said it was necessary to always move with change, not against it.
“Get on the leading edge of change,” he said. “Don’t just sit there and watch it happen, watch other people make money off of it. Change happens. Technology happens. Embrace it.”
Bottom line, Katz said, small business owners have to plan.
“No one plans to fail, but a lot of people fail to plan,” he said. “If companies do some effective planning, manage their cash flow, keep on selling and accept change, they will be well-positioned in the marketplace as we move into the future.”
For more information about the University of Kansas Small Business Development Center, visit its Web site at http://www.business.ku.edu/kusbdc/.