You can successfully open a business during difficult times of financial instability. Before you seek funding, ask friends, fellow business owners, or financial experts to review your business strategy. Develop and implement a marketing plan. Begin small and expand once things begin to pick up financially.
In an interesting episode of “The Daytime Show,” Pandit Jigna was asked by the co-host if it was possible to put a quote around “The Great Depression” that referred to business owners “piggybacking on a recession.” Mr. Pandit correctly said, “Yes.” He then went on to explain that business owners “always get the credit for doing their jobs well,” while the government takes the credit for not doing theirs. In the United States, business owners have been receiving a hefty tax cut and most of them are claiming that the United States is in an economic “jam.” The business community has also said that the United States has fallen into a “slide toward mediocrity,” even as the country’s economic growth continues to outpace China. A similar argument was made about the United Kingdom by Business Week.
The United Kingdom’s National Institute of Economic Growth (NIEG) found in its latest economic report that only six of the eight economic regions in the UK are growing in line with expectations. Mr. Pandit, host of the “Daytime Show,” clarified that he meant that business owners have done a “good job” of projecting a growth for the economy. According to him, the fact that no one is predicting an immediate recession was a key takeaway from the report. The United Kingdom’s growth forecast is far from stellar.
In line with the business world reeling from last year’s global financial meltdown, many people blame small business owners for not being more proactive in helping to keep their businesses afloat during this challenging time. Some people even went so far as to say small business owners were selfish for not doing more to help. However, Mr. Pandit says that the problem is much bigger than that. He explained that there are two sides to the story. One is the small business owner himself, and the other is the state of the economy as a whole. Mr. Pandit cited the example of a major financial crisis in Japan in the 1990s as an example of how small business owners and the state responded to help businesses recover.
Many small business owners do not have a business plan and are simply working on ideas for how to survive during rough times. Mr. Pandit explained that a business plan is not something that small businesses should ignore at all. He said that there are specific steps that can be taken in the planning process to ensure that they have the best chance of surviving and thriving during tough times. These steps include: having a business strategy, finding the right partners, getting funding, expanding, and diversifying.
The second key takeaway from Mr. Pandit’s speech is that small businesses need to protect themselves against a coming economic calamity – the “tying-up” of our cash flow. One solution that many small businesses are considering taking is a paycheck protection program. Mr. Pandit noted that many state laws now require employers to provide some type of paycheck protection program to their employees. In addition to providing these funds as an employee benefit, some states are encouraging small businesses to implement a program by requiring the business to enroll in a program before it applies for a small business loan from state banks.
The third key takeaway from Mr. Pandit’s talk was to understand how business cash flow can impact the success of a business. Mr. Pandit shared statistics showing that only 18% of large companies between them and small businesses have access to traditional loans. The vast majority of small businesses are therefore forced to use working capital – cash generated from sales or assets. By comparison, traditional financing usually involves long-term loans that have variable interest rates and come with high repayment schedules.
The fourth and final key takeaway from Mr. Pandit’s address is to develop a business plan – a clear statement of the purpose of your business along with a detailed strategy outlining how you will realize your goals and market to a targeted audience. Mr. Pandit strongly recommended that small businesses start with a detailed business plan. Writing a business plan doesn’t have to be a difficult task. He provided examples of business plans he had written and shared several keys tips on how to format a business plan effectively. There are many resources on the web to help small business owners create effective business plans; if the problem is not too big, writing a business plan should be an easy task for most small business owners.