Jeff Stibel is CEO of Dun & Bradstreet Credibility Corp. He was previously president and CEO of Web.com and general manager of web services at United Online. He currently serves on the board of directors for The Search Agency,EdgeCast and Autobytel, as well as on academic boards for Tufts University and Brown University.
When looking at the U.S. economy, the only thing that can be said with certainty is that we are in a period of extremeuncertainty. Consumer confidence hit a 30-year low as consumer spending hit a record high for the year. Wall Street is announcing record corporate profits while main street is suffering. And corporate CEOs are receiving massive incomes at a time when the country has unacceptably high unemployment rates.
We have entered the Bermuda Triangle of economic indicators, where our economic compass has gone haywire. The U.S. stock market has entered a period of extreme volatility. Stock indexes lost over 5% of their value the day after S&P’s debt downgrade, only to fully bounce back a few days later.
Eventually, these extreme market fluctuations will subside. Until that occurs, however, the market’s volatility will ripple through the economy with very real, albeit uneven, force.
These wild fluctuations in the stock market are causing consumers to tighten their spending, thus causing increased pressure on small businesses. While large companies can weather the storm by dipping into cash reserves or discounting prices, the neighborhood business has no such buffer.
Small businesses, already squeezed for operating capital by vendors and lenders, will need to adopt methods to bring stability to an otherwise unstable and uncertain landscape.
Here are five such tips for doing so.
1. Request Better Payment Terms
Although banks are hesitant to provide small businesses with access to capital, there is an alternative form of financing available — trade credit. By asking for longer payment terms such as 60, 90 or even 120 days, a small business can turn their receivables into a form of operating capital.
2. Social Networking
Facebook and Twitter are not just for fun; they are also immensely powerful business tools for marketing and customer outreach. Even better, they are free. Chances are, your customers are already on these networks, which is why you need to be there too. Heed Seth Godin’s comment that “five thousand people who want to hear your message are more valuable than five million who don’t.” Rather than cast a wide and perhaps ineffective marketing net, employ Facebook and Twitter to target your audience directly and inexpensively.
3. Improve Customer Service
Economic uncertainty often compels companies to reduce all expenses, but some cuts will prove more expensive in the long run. For example, as a cost savings, your competitors may be skimming on customer service. You should resist the impulse to do the same. Remember, it’s generally more expensive to acquire new customers than to keep existing ones. Furthermore, when others are cutting the quality of customer care, improvements to your service will get your company noticed.
4. Use Online Directories
In order increase traffic to your business (both online and off), seek out web directories that are free or where registration is relatively inexpensive. Google Places offers a free and useful directory of businesses. Bing,CityGrid and other business directories offer similar services through which consumers can learn about your company.
5. Separate Your Personal from Your Business Credit
Apply for a credit card under the name of your business as opposed to your own name. Building a business credit history distinct from your personal credit will enable your business to qualify for better payment terms, credit lines, loans and other forms of capital.
Keep in mind that banks and other lenders will not loan to a business if lacks sufficient credit history, so if you haven’t established credit card and checking accounts under your business’ name, now is the time. Over time, the switch will provide the double benefit of building up your business credit while protecting you from having to give personal guarantees.
Image courtesy of Flickr, mikeleeorg