Bankers are now the lifeguards of the small business world.
If you are on the hunt for ideas to help your business borrowers who are feeling the economic pinch, here are some of their questions and some great answers from a recent Forbes.com article. It is worth the read…here are the highlights.
1) How can I plan when I can’t project?
- Focus on your best customers. They may be more predictable.
- Restructure to give incentive for longer commitments. This will help you plan and improve their ability to plan, as well.
2) Should I go after lower-margin business just to keep the doors open ?
Yes, if need be. Do not drop prices on the higher-margin business, though.
- Consider instead friendlier payment terms on higher-margin business.
- With the lower-margin business, can you realign operating costs?
- Are there projects you turned down last year as too small that might be a good fit now?
3) How can I get my customers to pay me?
- Be sure your contracts have interest attached for more than 30 days.
- Be relentless. Keep in touch and keep asking. The squeeky wheel has a better chance to get the grease when times are tough.
4) How do I scare up new customers when my old ones are going away?
- Consider diversifying into a related customer base.
- Consider offering your services in a way that no one else is, and that you can’t in a usual market.
The idea provided was to offer overnight car repairs. With the auto mechanics out of work, you might be able to put an overnight shift on. Of course, make sure the operating costs of keeping the shop open overnight don’t eat up the profits.
5) How do I cut my staff?
- Don’t wait too long. Most small business owners have close personal relationships with their employees.
- Consider across the board reduction in hours rather than letting staff go.
- Use a scalpel instead of a chain saw. This is not about seniority but about what jobs are still critical to the company and where you have excess capacity.
- Consider what you can outsource.
- Which will be hardest to refill when business picks up again.
6) Should I be playing offense or defense with my capital expenditures?
- If you have a strong balance sheet, consider capital expenditures that will provide market-share capacity in your core business.
- Focus on what will provide or improve solid cash flow.
7) How do I raise money and run my business at the same time?
- Raise as much money as you can, when you can.
- If it is available, this is not the time to hold off because you don’t want to dillute your own investment.
8)Should I switch banks?
I thought that one would get your attention. The article recommends that if the bank you are with is not giving you the credit you need, shop around.
This next bit of advice is probably not what you would recommend because it can negatively impact your bank, but you should know that the business owners are hearing this from others.
- Draw on your entire unused lines of credit.
- Look for a new bank. There is less stigma attached to shopping banks right now because some businesses are more worried about their bank than the bank is worried about them.
- Consider a community lender unscathed by underperforming
“Some of them could be in an aggressive mode to pick off new clients,” says Doug Tatum, founder of his eponymous consulting firm and author of No Man’s Land: What to Do When Your Company is Too Big to Be Small But Too Small to Be Big.
9) How do I negotiate with my vendors?
- Vendors have a vested interest in their suppliers making it through the recession, too.
- Approach them as business partners.
What questions are your business borrowers asking?
What resources have you come up with to answer them?