January 2009 Economic Solutions

First, we should focus on our liquidity. Liquidity is the measurement of current assets (primarily cash, collectible receivables and inventory) compared to current liabilities (primarily payables, credit cards, short-term debts). One of the challenges will be to increase the current assets, especially cash, and reduce current liabilities. Having cash management discipline will be crucial. Several ways to increase liquidity are equity infusion, increasing margins (which we will discuss later) and conducting business with clients we know, businesses we understand and have good character. Additionally, financial institutions are not currently lending nor can small businesses count on financial institutions to lend in the future. Thus small businesses cannot count on receiving working capital through a line of credit to help fuel growth. Therefore, small businesses will have to fuel their own growth. Building liquidity will help small businesses be able to fuel this future growth.

Operational efficiency and productivity will be another area to focus on. In an environment of lower revenues new solutions will be necessary. Since you may not be able to grow your margins through revenues you will need to look at the cost side of the equation. One way to reduce costs is to be more efficient through revamping the work flow to save time (labor) or improve efficiency of materials used. One example is to purchase new equipment which could save out-sourcing, material costs and reduce utilities. One of my clients was able to install a new piece of equipment for $30,000 which has reduced his costs by $50,000 per year. This new piece of equipment paid for itself in less than one year.

Stay focused! Everyday business owners get distracted by a lot of little things. On top of the distractions I have noticed an increase amount of complaining about the economy. Unfortunately, complaining attitudes usually building on one another. Small business owners will need to stay focused and use their time and energy on finding solutions and spotting opportunity, not on complaining. I was told as a child that it was ok to complain if I had three solutions for every complaint. Staying focused will help us become more creative and find solutions through these challenging economic times.

The Boy Scout's motto is "Be Prepared". Business owners need to be prepared as well and to have a game plan for the future. Forming a plan for your business will help you stay focused on what tasks need to be done, priorities and to find creative solutions for your business. While staying focused is more for the short-term, having a plan will allow you to plan for the mid to long-term.

For extra credit, you can test your attitude. Being a small business owner is difficult. I believe a business owner needs to show a great attitude, be optimistic, but be grounded to reality. Being grounded to reality usually crashes into the other two. For example, a few years ago when I warned my clients and business associates of the real estate bubble I was viewed as a pessimist, not a realist and now as I mention spotting opportunity and preparing for growth I am labeled as a cheerleader instead of a realist.

These four items will take sacrifice and creative thinking. I recommend forming a board of advisors or a CEO roundtable to help you through the process. Forming these types of groups can be done for free. I used basic improv classes to help jump start the creative process though Blank Stage Productions. I will also be more than happy to send a few minutes on the telephone with you (mind you tax season is about to start so I cannot be too generous).

Mark Wyssbrod, Proacitve CPA, has been helping small businesses achieve their goals since 1999. His proactive philosophy stems from the fact that traditional tax preparers are usually simple historians who react to their client's prior and current positions. Such a reactive stance means trying to fix mistakes after those mistakes are already made. Mark would rather prevent any mistakes in the first place. You can reach Mark at (770) 664-8583.

Barron's Weekly

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