Monday, August 27, 2012

How Small Businesses Are Getting Squeezed

According to the Office Depot Small Business Index approximately 40% of small business owners have seen decreased profits this year or have not seen an increase in profits since last year. 

Many small businesses have had a harder time getting approved for business loans.  In some instances business loan limits have been reduced which prevents small business owners from getting additional work and makes it more difficult to pay employees and pay for equipment and supplies.  Small business owners have been forced to apply for business credit cards with higher interest rates.  

I renewed my business license this year and the cost increased by 62.5% with no warning.  I was shocked to see the price increase and called to verify.  The price had increased in January 2012 with no notification sent to business owners.  This seems like poor customer service. This is just one small example of the increased costs required to manage a small business.

Many invoices are paid 45 to 90 days or more after receipt for small businesses which makes it difficult when paying creditors, payroll and other business expenses.  An alternative is to seek non-traditional funding sources such as venture capitalists, angel investors or bank with credit unions.  

However, some credit unions have a cap on the amount of lending they can offer.  Small businesses employ approximately 50% of the private sector and lead in innovation of new products, services and technologies.  Lack of access to bank credit prevents small businesses from becoming innovative by developing new products or services or having resources to grow their business. 

Some small business owners try to offset costs by increasing their prices or selling more products and services but that is just a temporary solution.   Here are 9 tips to prevent getting squeezed.

  1. Late fee.  Charge a late fee for unpaid invoices over 90 days late.  Offer discounts and incentives to customers who pay on time.
  2. Plan B.  Look for additional ways to increase revenue to offset unpaid invoices and reduced access to credit.
  3. Quit.  Fire customers who repeatedly pay invoices late or not at all.  Consider hiring a collection agency to collect on unpaid invoices for large amounts.
  4. Sales.  Increase your marketing efforts.  Offer a referral or affiliate program to gain new sales.  Use free ways to advertise such as social media.
  5. Service. Provide exceptional customer service.  This will ensure you retain customers and helps to gain new customers.
  6. Think Outside. Think outside the box for inexpensive ways to gain new customers and gain exposure for the business.
  7. Reinvent.  Revamp email messages, business plan or marketing plan, slogans, mottos, logos, business cards to show off new ideas, products and services.
  8. Partner. Partner with local social and civic organizations or other businesses to offer special to members and employees.
  9. Verify.  Verify all orders, inventory, customer service levels, etc. to ensure you are providing 100% to customers and suppliers at all times.

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