The stock market may be reaching new highs, but as one network analyst observed, "The stock market is not the economy."
Company earnings are reaching new highs and so are stock prices.
But there are still many weak signs in the economy, and consumer confidence lags. Hiring is weak. Savings rates are low, and many people are reluctant to spend on discretionary items. This hurts specialty retail and service businesses disproportionately hard.
What can owners do to survive until things really turn around?
Although the simple answer is to increase revenue, cut expenses and manage cash flow, the devil is in the details. Here are several tactics to consider:
• The word SALE still draws customers, but increases in volume don't always offset the lost margin. It's better to offer discounts on larger volume purchases as opposed to an across-the-board price cut.
• Some local restaurants now offer a limited takeout menu or nightly specials. Customers can pick up an entrée and relax at home with their favorite wine.
• Expand the menu. Special items such as gluten-free entrées will develop a loyal customer base
• Low-tech service businesses can offer a free month's service or an introductory 2-for-1 promotion - anything to draw new customers.
• Consider a reduction in hours or closing on Saturdays. Obviously, certain businesses depend on weekend sales, but some experience lighter traffic that does not support staying open.
• Search for new suppliers and squeeze your existing ones.
• To improve cash flow, reduce inventory and push suppliers for extended payment terms. Car dealers and furniture stores make financing a key part of their sales package.
To survive, you must experiment with different combinations of tactics and monitor the results. The right answer is whatever works.
Ralph Hershberger is president of SCORE Southern Arizona, a nonprofit group that offers free small-business counseling and mentoring by appointment at several locations. For more information, go to www.southernarizona.score.org, send email to firstname.lastname@example.org or call 505-3636.