July 2009 Archives

July 28, 2009

Improve Your Cash Flow

Here's the second big-picture strategy from my save your business list:
2. Improve your cash flow.
Having enough cash flow to pay your bills can include spending less (cutting overhead and office expenses, reducing employees' hours or benefits, moving to a cheaper location, or selling pricey equipment) and bringing in more cash (giving a discount for prompt payment, stepping up your collection efforts, or getting customers to help you get rid of some inventory).

A recent article on about.com had some good ideas on improving cash flow and collecting accounts receivable faster:

  1. Don't wait until the end of the month to send invoices.
  2. Ask for partial payments (break a job up into phases so you can bill earlier).
  3. Give your customers or clients a discount for paying early.
  4. Make calls on accounts receivable regularly.
  5. Pay bills only when they're due.

This last one I agree with only to an extent. As I talked about in a prior post, if you're not hurting for cash, paying a bill a few days early can benefit you in several ways, even if you don't get a discount.

July 26, 2009

React Quickly to Bad News

Here's the first strategy from my save your business list. It's a fairly obvious one, but not following it has cost many a small business owner their shirt over the last six months:

1) You must react quickly to bad news.

If an economic downturn, bad industry news, or the illness of a key employee or owner threatens the viability of your company, you need to make a quick decision: Will you try to fix the problem (for example, in a downturn, you might cut costs sharply to try to stay afloat), change the direction of your business, try to sell your business, or simply close down? Failing to act quickly can bring down a business that could have otherwise have survived.

Here's an example: A friend of mine worked at a company that lost half of its service business by January 2009. But they kept hoping things would turn around and didn't want to lose any employees, so they kept a full staff until April, when they finally made some gradual layoffs. Then in May, when they started having trouble paying bills as they came due, they reduced the work week to from 40 hours to 30 hours. In June, they laid off a few more employees each week, until just a few people were left in the office. The first week of July, fearing the worst, two key employees left for new jobs, and the company imploded. Lesson to be learned: The company should have made deep cuts in January, probably laying off half of its workforce then. If it had done that, it would have had a good chance of keeping the rest of its employees busy at 40 hours per week and might have been able to hold on to its key employees. Of course, hindsight is 20/20.

July 24, 2009

New Book From Nolo: Save Your Small Business

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My new book (okay, the one I co-authored with Nolo's Ralph Warner), Save Your Small Business: 10 Crucial Strategies to Survive Hard Times or Close Down & Move On, has just arrived from the printer! To celebrate its publication, over the next ten posts I'll introduce the book's 10 core strategies to saving a troubled business.

Here they are:
1) React quickly to bad news
2) Improve your cash flow
3) Minimize your personal liability for your debts
4) Concentrate your efforts on what's really profitable
5) Innovate on a shoestring
6) Identity your customers to focus your marketing efforts on them
7) Don't waste money on ineffective marketing
8) If you have to cut payroll costs, try reduced workweeks, handle layoffs fairly, and keep your best people
9) Don't overwork long hours and drag your business down with you
10) Work with, not against, your competitors

July 19, 2009

Starting a Restaurant in a Down Economy

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Many entrepreneurs and foodies dream about starting a new restaurant, sure that they can beat the odds, even though statistics say that the restaurant failure rate is among the highest of all small businesses. Think you can beat the odds, even in an economic downturn? Here are some good tips on starting a restaurant I just stumbled on, complements of Entrepreneur magazine's Sara Wilson.

For all the legal and business information you need to get your business off the ground and running, see Legal Guide for Starting & Running a Small Business, by Fred Steingold (Nolo).

July 13, 2009

Why Paying Bills on Time Makes Sense

Who can pay their bills on time right now, especially when your customers or clients aren't paying you on time? But if you can pay your bills on time, it can save you money and help you in the long run. Here's why:

  • It can save you money if you negotiate a discount for paying early or on time.
  • It saves and builds your reputation.
  • It encourages your suppliers and vendors to recommend your business and give you excellent service.
  • It gives you a payment cushion for when you REALLY need to delay payment, thanks to the goodwill you've built up.

And here's something else to consider: If you can't pay new invoices as they come due, even after you've trimmed your expenses, adjusted your strategy, and put some new marketing in place, you have to ask yourself whether your business is viable in the long run. Okay, end of annoying post.

In a later post I'll talk about what to do if you have to pay a bill late, which may be more applicable in this environment.

July 6, 2009

IRS Mileage Rates Lower for 2009

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The mileage rates for 2009 are lower than that of the second half of 2008, reflecting the reversal of rising gasoline prices in late 2008, but are still higher than the rates in effect at the beginning of 2008.

Here they are the mileage rates for this year and last:

2009 Mileage Rates

The standard mileage rates for 2009 are:

  • 55 cents per mile for business driving, and
  • 24 cents per mile for medical or moving purposes.

For those who haven't yet filed taxes for the 2008 tax year, here are the rates for 2008:

2008 Mileage Rates

The standard mileage rates for the first half of 2008 were:

  • 50.5 cents per mile for business driving, and
  • 19 cents per mile for medical or moving purposes.

Because of the increases in fuel prices in mid-2008, the standard mileage rates for the second half of 2008 were:

  • 58.5 cents per mile for business driving, and
  • 27 cents per mile for medical or moving purposes.