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Here are tips for small biz survival during recession

November 17, 2008
"In the course of human endeavor chance favors the prepared mind."

-Louis Pasteur

Feel the sway? It's the shudder of our economy as major fault lines shift. The economic Richter scale is registering 9.0. Stock market volatility has been unprecedented this autumn. It's a wonder there are any leaves left on the trees.

Our federal government feels the need to get in the game with a bank rescue scheme worthy of Bonnie and Clyde. In order to accept the dole, banks must grant the government negotiable warrants to purchase stock. This generous offer comes with a veiled threat: Take the dole or suffer the inferential ignominy that are too weak to qualify. Uncle Sam could become the largest shareholder of bank stock since Scrooge McDuck.

Now look who has a hand out. It's our automobile manufacturers. They want to be paid for a decade of standing around and watching the Japanese eat their lunch. Executives of the big three automakers were in Washington Nov. 6 to beg for financial aid. According to The New York Times, each will report losses of more than $2 billion. Our government will no doubt comply.

Articles have appeared in The Wall Street Journal ad nauseam about how the economy got into this fix and who is to blame. We have learned a new word: "subprime." Old words are more appropriate: subpar (performance) and substandard (morals). No need for a rehash of all that here. The question of the day is, how do we survive?

Inasmuch as straying from the three R's — the basics — got many institutions into trouble, it is fitting to suggest five R's for small-business survival.

1. Rig your ship for the long haul. The government bailout is no quick fix. Significant problems are going to take some time to work out. The consensus of Indiana University economists as quoted in IBJ Daily was that "a recession that started in the third quarter will last through the middle of next year and possibly until 2010." According to The New York Times, reported sales at the nation's largest retailers nosedived in October. Stores are already offering discounts. Santa's elves might as well go to the Bahamas for the winter because nobody is buying.

The International Energy Agency warned Nov. 6 that the supply shortages responsible for triple-digit oil prices last summer are unresolved and could send gasoline costs back up. Prepare for more shock at the pump. The Labor Department reported that the U.S. unemployment rates soared to a 14-year high in October, no doubt precipitating an impending credit card crisis. Even Warren Buffett's Berkshire Hathaway suffered a 70-percent decline of its third-quarter profit. Folks, you ain't seen nothin' yet.

2. Reduce exposure. Do not crawl into a shell, but be conservative. Take home less in order to protect your business. Moderate. Green-light only the projects that generate sales or save expenses.

3. React quickly. Situations are changing day by day. Avoid pitfalls. Also, opportunities will arise. Be prepared. According to the U.S. Bureau of Labor Statistics, layoff events have reached their highest level in seven years. That employee you've been coveting might be laid off and interested. The location that was never available might come on the market and that prize customer might be shed by your competitor. Be nimble. Adapt to the changing situation.

4. Ramp up customer service and public relations. Tell your customers, "Hey, we're still here and we mean to survive and do business. You are important to us." Win the scramble for customers by fostering relationships, an important concept in any economy. Advertising is as essential today as almost any expense item in the P&L.

And above all ...

5. Remain calm.
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Maurer is a shareholder in IBJ Media Corp., which owns Indianapolis Business Journal. His column appears every other week. To comment on this column, send e-mail to mmaurer@ibj.com.
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