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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 and should 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 flamboyancy of the advertising
or the persuasiveness of the salesperson. Then we sort of
“wake up” a couple of days later and find that 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 status 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.

Particularly when sales are down, you must be
“hard-nosed” with people trying to sell you luxuries for your
business. When business is booming, you undoubtedly will
allow sales people to show you new models of equipment
or a new line of supplies; but when your business is down,
skip the entertaining frills and concentrate on the basics.

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Great care must be taken however, to maintain courtesy
and allow these sellers to consider you a friend and call
back at another time. Your company’s books should reflect
your way of thinking, and whoever maintains them should
generate information according to your policies. Thus, you
should hire an outside accountant or accounting firm to
figure your return on your investment, as well as the
turnover on your accounts receivable and inventory. Such
an audit or survey should focus in depth on any or every
item within your financial statement that merits special
attention. In this way, you’ll probably uncover any potential
financial problems before they become readily apparent,
and certainly before they could get out of hand. Many small
companies set up advisory boards of outside professional
people. These are sometimes known as Power Circles and
once in place, the business always benefits, especially in
times of short operating capital. Such an advisory board or
power circle should include an attorney, a certified public
accountant, civic club leaders, owners or managers of
businesses similar to yours, and retired executives. Setting
up such an advisory board of directors is really quite easy,
because most people you ask will be honored to serve.

Once your board is set up, you should meet about once a
month and present material for review. Each meeting
should be a discussion of your business problems and an
input from your advisors relative to possible solutions.

These members of your board of advisors should offer you
advice as well as alternatives, and provide you with
objectivity. No formal decisions need to be made either at
your board meeting, or as a result of them, but you should
be able to gain a great deal from the suggestions you hear.

You will find that most of your customers have the money
to pay at least some of what they owe you immediately. To
keep them current, and the number of accounts receivable
in your files to a minimum, you should call them on the
phone and ask for some kind of explanation why they’re
falling behind. If you develop such a habit as part of your
operating procedure, you’ll find your invoices will magically
be drawn to the front of their piles of bills to pay. While
maintaining a courteous attitude, don’t be hesitant, or too
much of a “nice guy” when it comes to collecting money.

Something else that’s a very good business practice, but
which few business owners do is to methodically build a
credit rating with their local banks. Particularly when you
have a good cash flow, you should borrow $100 to $1,000
from your banks every 90 days or so. Simply borrow the
money, and place it in an interest bearing account, and then
pay it all back at least a month or so before it’s due. By
doing this, you will increase the borrowing power of your
signature, and strengthen your ability to obtain needed
financing on short notice. This is a kind of business leverage
that will be of great value to you if or whenever your cash
position becomes less favorable. By all means, join your
industry’s local and national trade associations. Most of
these organizations have a wealth of information available
on everything from details on your competitors to average
industry sales figures, new products, services, and trends. If
you are given a membership certificate or wall plaque, you
should display these conspicuously on you office wall.

Customers like to see such “seals of approval” and feel
additional confidence in your business when they see them.

Still another thing often overlooked: If at all possible, you
should have your spouse work in the business with you for
at least three or four weeks per year. The important thing is
that if for any reason you are not available to run the
business, your spouse will be familiar with certain people
and situations about your business. These people should
include your attorney, accountant, any consultants or
advisors, creditors and your major suppliers. The long-term
advantages of having your spouse work four weeks per
year in your business with you will greatly outweigh the
short- term inconvenience. Many couples share
responsibility and time entirely, which is in most cases even
more desirable. Whenever you can, and as often as you
need it, take advantage of whatever free business
counseling is available. The Small Business Administration
published many excellent booklets, checklists and
brochures on quite a large variety of businesses. These
publications are available through the U.S. Government
Printing Office. Most local universities, and many private
organizations hold seminars at minimal cost, and often
without charge. You should also take advantage of the
services offered by your bank and local library. The
important thing about running a small business is to know
the direction in which you’re heading; to know on a
day-to-day basis your progress in that very direction; to be
aware of what your competitors are doing and to practice
good money management at all times. All this will prepare
you to recognize potential problems before they arise. In
order to survive with a small business, regardless of the
economic climate, it is essential to surround yourself with
smart people, and practice sound business management at
all times.

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