“45% percent of the 27 million small businesses in the US say they are currently not profitable,” according to a recent Newsweek article summarizing a survey by George S. May International Co. These are businesses that employ 100 or fewer people, and make up half the nation’s private, non-farm payroll.
If your business is showing signs of persistent profitability problems, now is the time to make plans that change the status quo. Here are some suggestions to start your thinking.
Whenever an operation is spending more than it makes, there are only three things that can be done: increase revenue, decrease expenses, or shed assets. Approaching the last third of 2009 and perhaps the bottoming out of the recession, it is time to plan the steps to prepare your business for a stronger 2010 performance.
Sometimes it is more comfortable to live in denial and not face up to making the tough decisions needed now. And sometimes we feel we have the plan in our heads and that we can work our way through it. But a plan that is in your head is no plan, it is just a dream. Put your options down on paper and evaluate the effect of each one. Then write the actions you need to take to achieve the results you want. And track yourself as you work your plan.
Decreased expenses is responsible for profit improvement in many of the public companies in the last quarter. And maybe you can gain some traction with a miserly approach to your business operations. Reducing payroll may work if the productivity of the remaining employees can be increased as business grows back, and their morale can be sustained. But the cost of replacing people resources can be very high. Cutting head count is low on the list for a small business. On the other hand, a “fanatical” attention to the little costs that add up in a business can make a difference. One hundred dollars saved in electricity each month flows right to the bottom line. Look for savings in all the “expense habits” you and your staff have made routine. Question everything.
If a business does not continue to grow, it will eventually decline. It cannot remain static. Increasing revenue can be a big profit boost if the new revenue does not involve too heavy an investment in inventory, marketing, or personnel. It may be right to look at a new product line or marketplace, but before jumping in take the time to create a business plan that shows true potential. Regardless of how you go about it, a revenue increase plan for 2010 must be in place.
And if you shed assets use the proceeds to pay down debt, not to meet payroll. Us asset sales to offset liabilities not cover operating expenses. This approach is usually a one shot deal and can be of value if you have unused equipment, excess inventory, etc. But make sure you don’t need to repurchase the asset later when business improves.
You are a leader and your team expects you to make the decisions that are needed to maintain business prosperity. Keep this responsibility at the forefront of your mind this month and make it a priority to produce a year-end action plan. Your business should be in the 55% category…making money and moving forward. It’s your job!
