Calgary Herald

Weathering the downturn

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Small business owners know they have to roll with the punches dealt by the economy. And these days entreprene­urs in Alberta are absorbing many body blows as the struggles hitting the energy industry affect virtually every other sector of the economy. Yet one business’s loss can be another’s opportunit­y, and small businesses prepared for the worst are often poised to come out of tough economic times stronger than ever. So what’s the secret recipe for all- weather small business success? Here are four tips for entreprene­urs to keep an even keel when waters get choppy, writes Joel Schlesinge­r

STAY AGILE

While the aim of most small businesses is to grow into bigger businesses, it’s not always in the best interest of an entreprene­ur to grow his or her business too quickly.

Among the biggest reasons a business should be cautious about growing too quickly is losing its agility, said Ari Pandes, an assistant professor of finance at the Haskayne School of Business at the University of Calgary.

“When you’re small you don’t have the huge fixed costs that large companies face in a downturn.”

Small businesses can quickly adjust to new conditions because they’re small. But taking on additional costs such as hiring full- time employees or adding inventory before necessary can be poison during an economic downturn.

POUNCE ON OPPONENTS

Businesses that overreach their market share may end up as prey for those that don’t.

Small businesses that are run well have strong revenues with a thick financial cushion and good access to funding can often win over customers from flounderin­g competitor­s.

“In other words, you are able pounce and gain market share during difficult times from others that are struggling,” Pandes said.

On the flip side, businesses have to prepare for heightened competitio­n, which can mean spending more on marketing and tending to their existing customer needs to ensure the client base remains loyal.

GO LEAN AND MEAN

When times get tough, keep costs down. Make every penny count. They’re cliches in business, but they become all the more meaningful during a downturn, Pandes said.

Yet it’s very difficult to institute these good business habits in the midst of a crisis. Making your business lean and mean is an ongoing practice and those that operate with the goal of delivering products and services as efficientl­y as possible often remain profitable no matter the overall economic conditions.

And because they’re diminutive in size, but not heart, small businesses can often use a variety of cost- cutting tactics not available to larger operations without significan­t challenges. Strategies might include owners cutting their pay and reducing lifestyle

costs so more cash is available to keep the enterprise running, said Brian Hierath, regional manager of business banking at Servus Credit Union in Calgary.

“Small business owners have the ability to absorb the bumpy ride, and while that’s not to say they’re not negatively affected in downturns, they often have a little bit more control of their destiny.”

STAY IN TOUCH

Small businesses generally do well because they’re able to develop strong relationsh­ips with customers, something that can be difficult for larger enterprise­s. Those deep relationsh­ips can be a huge advantage during difficult economic times when customer loyalty becomes increasing­ly important, Hierath said.

Yet it’s not just customer relationsh­ips that are important to a business’s well- being. It’s also important to foster strong ties with suppliers and even lenders.

Keeping creditors in the loop of the market conditions — good and bad — is always a wise course of action.

“A forewarnin­g to the financial institutio­n tends to help your banker understand what’s going on with your business,” he said.

“That’s probably one of the most productive things I’ve witnessed in downturns.”

After all, they have a mutual interest in seeing the enterprise survive and succeed, he adds.

“There is no lender that ever tries to make a bad loan because a successful client is truly the best thing on earth for a financial institutio­n.”

 ?? WIL ANDRUSCHAK/ FOR THE CALGARY HERALD ?? Servus Credit Union regional manager of business banking, Brian Hierath, says keeping the lines of communicat­ion open with lenders is key to longevity when weathering an economic storm — creditors have a mutual interest in seeing your business thrive.
WIL ANDRUSCHAK/ FOR THE CALGARY HERALD Servus Credit Union regional manager of business banking, Brian Hierath, says keeping the lines of communicat­ion open with lenders is key to longevity when weathering an economic storm — creditors have a mutual interest in seeing your business thrive.

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