02/ 15/ 2006
by Jeffrey Moses
When your company runs into a major difficulty, roadblock or key decision point, it can be a knee-jerk reaction to throw money at the problem, hoping it will go away. But borrowing or taking money from reserves often is not the best solution––and may lead to even greater problems in future.
A better step may be to examine the situation in detail to determine if other issues are involved. By doing so, you may be able to address the situation more economically and thoroughly, without future problems resulting.
Rather than dipping into red ink when problems arise, consider the following:
1. Solicit additional information from outside your company. Problems in production, sales, distribution, marketing, accounting, human relations, IT, cash flow and other aspects of operations often are more a matter of finding the right solution than spending more money. Consider speaking with mentors, experts or consultants experienced with small-business problems in the specific areas you need addressed. Seminars, classes and books may also provide help––but when you've reached a particularly sticky logjam, you probably need one-on-one consultation.
2. Hire an expert as a full-time employee. Often, bringing in someone who is experienced in the problems you're facing can make all the difference. When you have an employee capable of providing solutions, you won't have to spend time and money searching for outside help.
3. Maybe you need to pull the plug on a new line or new production avenues. Throwing good money after bad never solves the problem, whereas cutting your losses in a particular area can give a breath of fresh air to the entire company. This decision usually involves getting additional information about the situation, as described above.
4. Trim staff. It’s always hard for small companies to let people go. Good employees become like part of the family. But reducing overall salaries may be the answer to cash flow problems.
5. Add temporary or permanent staff. Sometimes a new line of operation requires more people than you've anticipated––and will fail if staffing requirements aren't met.
6. Raise prices. If your profit margin is too thin, you'll continually feel on the edge. Sometimes, a move as simple as raising prices can give the boost you need. Be careful, however, of raising prices to the point at which overall sales and profits fall.
7. Lower prices. Another contradiction? Not really. Sometimes, lowering prices can give you the edge you need over competitors and increase market share.
8. Make sure that you're taking advantage of your customers’ seasonal needs. Offering the same products or services 12 months a year may mean that you're missing seasonal opportunities.
9. Test your ideas before putting money behind them. How? Select small geographic areas or target demographics as samples before going national. Test opinions of consumers before committing funds to new projects. Send out 1,000 mailers to test results before you send out 100,000.
10. Bring your employees into the decisionmaking process. Take advantage of your staff’s intimate knowledge of the situation. Ask for advice, suggestions or even personal involvement. Employees may come up with innovative solutions––and they may even surprise you by offering to work at reduced salaries until things turn around.
