Despite some encouraging signs that the economy is on the mend, the economic climate is still tough for many small businesses.
We spoke recently with Ray Sprague, a small business expert and senior vice president of The Hartford's Small Commercial insurance division. Sprague shared a few insights from a survey of 2,004 small business owners from his company's report, Small Business Success Study 2012. Although small business owners are "very concerned about the economy and economic growth, they see themselves as successes," he says.
Why is it that while most small business owners didn't expect an economic turnaround soon -- only 33 percent were optimistic about the economy improving this year -- most of them (68 percent) feel that their businesses are successful?
Here are five tips to help you ride out a rough economy and succeed in a challenging business landscape.
5 Strategies for Thriving in a Challenged Economy
1. Don't Slow Down
When business is less than brisk, it's the perfect time to speed up your improvement plans.
Instead of drumming your fingers waiting for the next customer to drop by or call, you can, for example, take definitive steps to cut costs. Eighty percent of the small business owners surveyed by The Hartford said that they looked for cost-cutting opportunities as a way to help their companies better weather a choppy economic environment.
And don't forget your current customers. Strengthening client relationships helped 76 percent of small business owners make up for the lack of new business. Meanwhile, 69 percent started prospecting for new clients and 65 percent refined their business plans.
But before taking any drastic steps, however, consider this next insight.
2. Avoid Risky Business Moves
In the business world, risk-takers are revered and admired. That is, when they succeed. But for entrepreneurs in an uncertain economy, playing it safe may be the wiser play.
Many small businesses are managing risk and keeping their companies afloat by taking a wait-and-see approach before committing to any big strategic shifts in their operations. According to the survey, 73 percent of small business owners said that they consider themselves conservative when it comes to taking risks.
Until business prospects improve, successful small businesses are taking a good hard look before they jump at exciting new growth opportunities.
3. Cut Costs Judiciously
There may come the time that you have to slash costs. Take a cue from The Hartford's survey takers.
Sixty-eight percent said that they took less money out of their businesses while 57 percent slowed their expansion plans by limiting their investments. Fifty-two percent cut owner or partner compensation and 50 percent hired fewer employees.
Explore these avenues before making changes that may have a detrimental impact on the goods and services you offer.
4. Procure Peace of Mind
First things first, create a disaster preparedness plan and stick to it. Next, make sure that your insurance policy addresses your needs.
Hurricane Sandy underscores the importance of not only having insurance but having the right kinds of insurance, said Sprague. Key to bouncing back from such a disaster or any other unexpected event is "having a relationship with an insurance professional and making sure that they have the right products," he explained.
Look for business-owner policies that include business interruption. If you're expanding geographically, make sure that your insurance provider can update your policy to account for regulations that differ from region to region.
Finally, consider your data.
While most insurance companies will help small businesses rebuild their storefronts and offices after a catastrophic loss, verify that your provider can handle data loss and breaches. After all, a hacked server can shutter a company just as effectively as any super storm.
5. Ultimately, Follow Your Passions
Yes, it sounds like something you'd see on a cheesy motivational poster, but 81 percent of small business owners defined success as doing something they feel passionate about and enjoy.
"Few are in it for the money," said Sprague. "What I love about small businesses is that these are not folks in corporate jobs," he added. Naturally, some business acumen plays a role, so expect some hard work to accompany the joys of pursuing your dreams.
The Hartford's data suggests that success may elude you if the only satisfaction that you get from your business endeavors is to watch your bank balances grow.
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