Released July 30, 2009
STILLWATER, Okla. – There is no arguing the fact that these are trying times.
Glenn Muske, Oklahoma State University Cooperative Extension interim associate dean, assistant director, family and consumer sciences, said most small businesses are finding it increasingly difficult to continue in our current economic climate.
“New customers are not coming in the door and existing customers are cutting back,” he said. “For many owners, this is the longest and deepest downturn they have ever experienced.”
For many small companies, the downturn is now reaching its third year as they started to feel the slowdown long before the larger companies.
Muske said many owners think this is the time to either close the business or perhaps to sell it. However in terms of selling the business, the value is often based on some multiplier of income and/or sales and since those have decreased, the valuation of the business is much lower than what it should be.
“This story is true for all businesses, those that may have been struggling before the recession but even for those businesses that had a healthy bottom line,” he said. “Either one of these two scenarios means, for the owner, a significant loss of one’s personal life savings – that is a real wake-up call for many. It causes them to question if they can even survive.”
What can a struggling business owner do?
Muske suggests the first step is asking yourself, Am I still excited about this business? Is it something I see myself operating every day? Do I have the passion and persistence to stick it out?
If your answers are positive, then you have the key element to staying power.
The next step is to ensure your family is still supportive. Whatever is done with the business will have a substantial impact on the family also.
Step three is to take a hard look at the basic facts beginning with do you still have clients? If so, things may not be as bad as you think.
Muske said clients are the lifeblood of your business and an on-going client base is something many competitors may not have.
You also need to take a hard, pragmatic look at what the numbers tell you. Are there ways to increase income and reduce expenses?
“The latter idea is often the first idea considered, sometimes even before you decide if you still want to be in this business or not,” he said. “So what are ways of reducing your expenses? Can you cut the cost of materials and supplies? What are labor expenses? Is there overhead that’s helpful but not crucial? These questions are important to go over.”
Be sure to go over the income side as well. This is one opportunity where increasing outlay may have substantial payoff.
“If not increasing, think seriously about whether or not your marketing efforts are something you want to reduce,” Muske said. “Remember that often this item is something your competitors may be cutting. Their reduction gives you new opportunities.”
One benefit today is many customers want to hear how your product or service can help them, in turn, save money.
“The current economic times are stressful for all,” Muske said. “However, they need not be the end of your business. Take the time to evaluate your alternatives.”
Various resources and agencies such as the local Cooperative Extension office along with eXtension (http://www.extension.org/entrepreneurship) and the Small Business Administration may offer the assistance your business needs.
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Editor: Katie Reim, 405-744-6792, katie.reim@okstate.edu
