Do you have a big container of antacids on your desk yet? If so, you may be entering that queasy time of your entrepreneurial journey: Business is up, then it’s down.
When you hit those down patches, you may feel dejected and helpless. Before you hit the panic button, take a deep breath. Slowdowns happen. In fact, very few entrepreneurs can honestly say they stumbled upon a business model that goes full tilt from day one!
A time of survival
Whatever the cause of the slowdown, the post-launch phase can be a tricky time for start-ups. There may be times when your focus is solely on survival, but the hope is your tenacity will pay off, allowing you to reach a phase of stability and success. (This classic article from the Harvard Business Review outlines the phases of business growth.)
Understanding the cycle
Consumer and client behavior is often cyclical, and usually beyond our control. The first step of getting through these periods is understanding what that looks like for your business and industry and when to expect it.
Seasonal: Seasonal fluctuations aren’t just for snowblower dealers, seed reps and owners of those charming Minnesota lakeside resorts. Weather, construction projects and your customers’ ever-shifting areas of focus and need can alter demand week to week, month to month.
Economic: The state of the economy and employment rates can sometimes be reflected in your ledger. A customer’s wealth (or perceived prosperity) can influence their willingness to spend money on luxuries, upgrades and even necessities.
How do you survive the ups and downs?
The best way to get control over the up-and-down phases for small business owners is preparation.
First, talk to colleagues in your industry, mentors and others who are attuned to the local business climate, and get a handle on the things that impact business flow.
Create a calendar. Keeping a visual of the anticipated peaks and valleys can be a powerful reminder and keep you on track to making a plan and sticking to it.
Get proactive about reducing expenses and increasing revenues before you reach one of the valleys of cash flow, so you’ll be in a better position if and when the slow period hits.
- Keep money in reserves. Yes, this is a phase when money may be tight, but it’s smart to make this a priority. Set a goal on how much you want to set aside every month, so when that rainy day visits your business, you can still pay your bills and see yourself through to the busier periods.
- Keep an eye on spending. Now that you’ve been in business for a while, you’ll have a better handle on your spending needs. Pore over the ledgers and expenses and actively seek cost-saving measures.
- Keep a scorecard. Using digital tools, track the performance of vendors and suppliers. If you’re not getting the full value of what you’re paying for, hold underperformers accountable and don’t back down from renegotiating terms.
- Focus on the A/R column. If you’re not already contacting late-paying customers and clients with phone calls and letters, now’s the time to ramp up your in-house collections effort.
- Sell subscriptions. Seeking creative ways to keep monthly cash flow coming in is one way to help you weather the slow periods. A subscription option for clients and customers for your goods and services may hold the answer.
What to do when a slowdown hits?
When demand backs off, you'll find yourself with more time. Use it to focus on big-picture tasks you can never get around to.
- Focus on your marketing plan
- Update your business plan
- Take an online course
- Network and attend local events
- Complete tax planning
- Focus on staff development
- Assign special projects to employees
Keep your doer spirit
At Minnwest Bank, we thrive on working with doers like you. With our community roots and deep expertise on the local market, you’ll have the right tools to get your business off the ground. Contact a banker today.
For more information about starting your own business, please see our related posts in our #smallbusinessjourney series:
Is your dream job working for yourself? 3 steps to launching your startup
The 411 on getting financing for your Minnesota startup
The dreaded bank visit: How to get ready for your business loan interview
