The economy grows and shrinks in response to thousands of independent variables. We experience times of tremendous spending and growth, as well as economic downturns where spending freezes and businesses and consumers everywhere suffer the consequences.

An economic problem could be right around the corner—a possibility no matter how good or bad things look—so do you know what your small business will do if spending comes crashing to a halt? What initiatives can your small business take to survive economic problems? So get into it.

• How can you Prepare Your Small Business for Economic Problems?
• How do I Recession Proof my Business?
• How can we Stop the Economic Crisis?
• What should Companies do When there is economic problems?
• Can you Start a Business in a Recession?
• Who Benefits in a Recession?
• How Can I Protect my Small Business?
• What Are The Most Effective Strategies For Promoting a Small Business Research?
• What Should The Government do to Benefit Small Businesses?
• What Are The Ways in Which a Government Can Support SMEs?
• Possible Initiatives to Protect Small Businesses During Covid-19 Pandemic
• How Can Small Business Survive in a Dynamic Industry?
• Providing Necessary Support to Avoid Suffocation by Huge Chains
• What Are 4 Ways The Government Can Foster Entrepreneurship?
• How Does The Government Encourage Production?
• How do Small Businesses Affect The Economy?
• What Are The Problems Faced by Small Businesses?
• What Are The Three Key Ways in Which Small Businesses Contribute to The Economy?
• Problems And Solutions of Small And Medium Enterprises

How can you Prepare Your Small Business for Economic Problems?

Stock market “crashes” and economic recessions are a natural part of the ebb and flow of our capitalistic economy, but even leading economists can’t predict the future with any real accuracy. As this RJO Futures article explains, there are some variables that tend to precipitate economic downturns—such as illogically high prices and low-interest rates, forming a kind of bubble—but these alone aren’t enough to definitively conclude when the next crisis will strike. Accordingly, you need to keep your business prepared for anything.

Read Also: American Business Sector: Possible Solutions to the Decline of Trust

How can you protect your business against an economic recession? Obviously, not every business is the same; for example, companies that serve consumer needs, rather than wants, will have an easier time surviving the next crisis.

Consumers tend to cut back spending on luxury items and other non-essentials, putting businesses that produce and sell those goods in more serious jeopardy. Still, almost every business will feel the effects of an economic downturn in some ways, and these are the strategies you can use to protect yourself:

1. Diversify your client pool. Your first job is to diversify your client base or customer base. If you have one major client you rely on for your income and that client is hit hard by the recession, you may lose the vast majority of your business. If you have lots of smaller clients, all from different areas, you can afford to lose more than one of them and still survive without much issue.

Diversify your pool by seeking different types of relationships with different companies (and target demographics). The more you hedge your bets here, the fewer chances you’ll have to experience the worst parts of the recession.

2. Have an emergency plan. Simply knowing what your company would do in an emergency can spare you the runaround if it actually happens. The word “emergency” here is used loosely; you could categorize an economic emergency as losing one of your top clients, running low on available cash, experiencing a major decline in sales, or being forced to close one of your physical locations. Think things through, and have a game plan ready in case the unexpected happens.

3. Understand the unique demands of your industry. Next, do some research into your industry and competition if you can, and look up what has happened during previous recessions. Is your industry one that’s traditionally hit hard by an economic downturn, or are there key areas of development you could pursue to help your business survive?

Your greatest assets here are mentors and other entrepreneurs who have made it through recessions in the past; they’ll have firsthand experience and knowledge of how this could affect your business.

4. Prepare for potential budget cuts. If your revenue crashes or you otherwise start having trouble making ends meet, your only option will be to temporarily decrease spending. In the event of such a crisis, it pays to have a plan made in advance, understanding where you would make budget cuts.

Obviously, this isn’t ideal, but you need to know what your necessities are and what you could stand to lose for a few months to a few years. Would you keep your budget cuts to one or two departments, or spread it throughout your organization? Would you cut jobs, or decrease your advertising spend? Think carefully about your priorities here.

5. Have alternate sources of income. You can also hedge your bets against revenue loss by establishing more diverse sources of income—and that goes beyond diversifying your client base. For example, you could start selling advertising on your site or use affiliate links to generate some extra cash.

There are countless ways to make passive income through your website, and even more that you could create with new product lines or peripheral sales. The more sources you have, the harder it will be for a recession to crush your business.

If you can follow these strategies proactively, while your business is thriving in economic prosperity, you’ll have a much easier time navigating the next inevitable market crash to come. Remember, fluctuations are a natural part of our economy, and recessions are unavoidable. All you can do is prepare for them the best you can, understand where they come from, and remind yourself that downturns are only temporary.

How do I Recession Proof my Business?

Declines in consumer confidence and decreased sales can threaten all businesses, but small businesses can be particularly vulnerable. They often don’t have reserves to help them weather difficult times. From protecting your cash flow to building your customer base, implementing a few practices in advance can help recession-proof your business so it survives and even thrives during economic downturns.

Protect Your Cash Flow

Cash flow is the lifeblood of your business. Money must continue inflowing and outflowing for optimum business health, with the obvious goal being that you bring in more income than you must spend on expenses. You’ll have expenses as long as your business exists.

Review Inventory Management

See if anything can be done to reduce your inventory costs without sacrificing the quality of goods sold or inconveniencing your customers. Maybe you’re ordering too many of particular items, or something can be sourced somewhere else at a better price.

Is there a drop-shipping alternative that will work for you so you can eliminate shipping and warehousing costs? Just because you’ve always ordered something from a particular supplier or done things in a particular way doesn’t mean that you have to keep doing things that way, especially when other ways can save you money.

Focus on Core Competencies

Small business owners often simplify the concept of “diversification,” translating it to simply “different.”

Simply adding other products or services to your offerings isn’t diversification. At best, it’s a waste of time and money. Worse, it can damage your core business by taking your time and your money away from what you do best, damaging your brand and reputation.

Win the Competition’s Customers

You must continue to expand your customer/client base if your small business is going to prosper in tough times. This means drawing customers from your competition.

Offer something more or different than what the other guy does. Research your competition and see what you can do to entice their customers into becoming your customers. How are your competitor’s advertising? Visit their business locations. Ask consumers what they like or don’t like about those companies, then tweak your own business practices accordingly.

Make the Most of Current Customers

We’ve all heard the old adage that a bird in the hand is worth two in the bush. The bird in the hand is your customer or client, and they’re an opportunity to make more sales without incurring the costs of finding new customers.

Even better, they might be loyal customers, giving you many more sales opportunities. You can’t afford to ignore the potential profits of shifting your sales focus to include established customers if you want to recession-proof your business.

The key here is excellent customer service. Ensure that your customers or clients love what you do or sell, and keep them happy. Yes, that means the customer is always right. Identify their needs, then meet them. You want to retain their business all costs. This is more important during a recession than at any other time.

Don’t Cut Back on Marketing

Many small businesses make the mistake of cutting their marketing budget to the bone in lean times, or even eliminating it entirely, but this is exactly when your small business needs marketing the most.

Consumers are restless. They’re always looking to make changes in their buying decisions. Help them find your products and services and to choose them rather than others by getting your name out there. Don’t quit marketing. Step up your marketing efforts.

Watch Your Credit Scores

Hard times make it harder to borrow, and small business loans are often among the first to feel the squeeze, particularly for businesses with iffy credit ratings. Monitor yours frequently and keep on top of them. There are three major business credit bureaus and each assesses your business’s creditworthiness differently:

• Experian
• Equifax
• Dunn & Bradstreet

You’ll stand a much better chance of being able to borrow the money you need to keep your business afloat if you have good personal credit as well. And keep in mind that the U.S. Small Business Administration makes easy-qualifying loans available during times of national economic crisis, in addition to its usual funding programs.

How can we Stop the Economic Crisis?

A look at various economic policies to deal with an economic crisis, such as a fall in GDP.

Economic crisis could involve

1. Lack of economic growth/recession
2. High Unemployment
3. Long-term structural deficits
4. Lack of confidence in finance and consumer sector.
5. Rapid devaluation

Solutions to economic crisis

1. Fiscal policy – When the government influences demand through changing spending or taxes.
   • Government investment in new infrastructure (e.g. New Deal in the 1930s) helps to stimulate demand and creates jobs.
   • Income tax cuts – increasing the disposable income of workers, encouraging them to spend.
2. Monetary policy –  When Central Bank influences demand and supply of money.
   • Cutting interest rates – makes borrowing cheaper and should increase the disposable income of firms and households – leading to higher spending.
   • Quantitative easing – when Central Bank creates money and buys bonds to reduce bond yields and
   • Helicopter money – when the central bank creates (prints) money and gives it to everyone in the economy.
3. Supply-side policies – Long-term policies to try and improve productivity and efficiency in the economy.
   • Free market supply-side policies – reducing government intervention in the economy, e.g. lower taxes
   • Interventionist policies – government spending on education and training
4. IMF bailout – IMF give money to stem the loss of confidence and implement structural adjustment policies, e.g. better tax collection, privatisation, price liberalisation.
5. Government bailout of industries/banks. To prevent loss of confidence in financial sectors.

Example – March 2020

In March 2020, the coronavirus has caused a sharp shock to demand – leading to recessionary pressures. It has caused a plummet in the oil price and the stock market falls. Some sectors of the economy have been particularly hard hit – travel, leisure, the gig economy. It is not known whether it will prove a temporary blip or turn into a full-scale recession. What is the best response to this crisis?

• Interest rate cut – The Bank of England and the Federal Reserve have cut interest rates. This will provide some relief to businesses and homeowners (they will have lower mortgage costs). However, it is unlikely to stimulate demand or make that much difference. In a difficult climate, business won’t start investing because of a minor cut in interest rates. Many gig-economy workers will not notice the interest rate cut. In essence, the interest rate cut is outweighed by negative sentiment.
• Income tax cut. Proposed by the White House, a payroll (income) tax cut increases disposable income and in theory, may encourage spending. However, an income tax cut doesn’t help those most affected by the crisis. Those made unemployed or the self-employed who see a fall in income. Also, many householders will probably save the tax cut – because of low confidence and uncertainty.
• Helicopter Money. This involves the Central Bank creating money and giving a fixed amount to everyone. This avoids means-testing and means those badly affected will get some income. In normal circumstances, printing money causes inflation. But, at the moment, there is a greater threat from deflationary pressures.
• Higher unemployment/sickness benefits. Higher benefits for those sick or unemployed – and make it easier to claim benefits. This will make big difference to those on the fringes of the economy. It will enable them to keep spending and pay their rent. Higher benefits are disliked by those who think it creates disincentives to work.
• Expansionary fiscal policy – Higher spending on public investment can kickstart the economy. But, this is a slow policy to act.
• Rent relief/mortgage relief – – Since this may prove to be a very short-run but steep crisis, the other option is to force banks to allow those with lost income to delay paying rent/mortgage relief or  the government can offer relief on tax bills and rates. This could make a difference between bankruptcy and surviving for firms on the edge after fall in demand.

To some extent, there are no policies that can prevent a slump in demand, when you get a crisis like this. But, the government can

1. Mitigate the effects for those left with no income – direct payment, rent relief, tax relief
2. Prevent the temporary slump turning into larger-scale recession – if the private sector cuts back investment, there is a role for both monetary and fiscal policy to provide additional demand.

Example of 2008/09 Recession

The first policy response was a cut in interest rates. In the UK, rates fell from 5% to 0.5%

In theory, lower interest rates make borrowing cheaper, and this should encourage consumption and investment. In the long term this may lead to higher growth.

However, cutting interest rates was not particularly effective in 2008/09. This was because

• Interest rates were lower but banks didn’t want to lend – there was a shortage of funds.
• Time lags involved – homeowners on fixed rate mortgages don’t notice for perhaps 2 years.
• Consumers had an inelastic response to lower rates, people didn’t want to spend because of economic climate

There was also a government bailout out for banks to prevent a loss of confidence in the financial system. This was a significant factor in preventing the crisis escalating.

Fiscal policy

In 2009 the UK, the government cut the rate of VAT to provide a fiscal stimulus.

In the US, there was a modest fiscal stimulus from the Obama administration.

The US also agreed to bailout large car firms which were at risk of going bankrupt. Bailing out car firms cost a lot, but it prevented a further rise in unemployment in the car and related industries.

It helped mitigate the effect of falling income and provide some receovery. In theory, lower taxes should increase consumer disposable income and therefore help increase Aggregate Demand (AD).

The recovery in the US was strong than the Eurozone, where governments were more concerned about levels of government borrowing and there was no real fiscal stimulus.

The drawback of fiscal policy is that developing countries may already have large public debts and therefore they may be nervous about borrowing more. In the Eurozone this was a big factor.

Supply Side Policies

Some economic crisis arise from structural problems in the economy. For example, they may involve

• Corruption and failure to raise sufficient tax revenue
• Lack of competitiveness (e.g. rising wage costs)
• Poor productivity growth
• Low levels of education and training

In these cases, countries may not just need an increase in Aggregate demand, but also to reform the supply side of the economy to improve competitiveness. Therefore, it may be necessary to pursue policies such as:

• Education and training – increase skills and mobility of labour.
• Reduce the power of trades unions and minimum wages to reduce labour costs
• Reduce labour market protection which increases costs of labour and discourages firms from employing workers.
• Privatisation and deregulation

Devaluation

Devaluation is a policy to reduce the value of the exchange rate. This has the advantage of:

• Reducing the cost of exports and improving competitiveness
• Helping to boost export demand and therefore increase aggregate demand and economic growth.

For example, countries in the Euro-zone such as Italy, Greece and Spain have suffered from a decline in competitiveness which has contributed to lower growth and higher unemployment.

The drawback of devaluation is that it can cause inflationary pressures, but if an economy is experiencing low growth, then inflation may not be a problem.

Dealing with a debt crisis

UK National debt – grew significantly during First and Second World War – long period of economic growth enabled the economy to pay off debt.

Many countries are making the mistake of trying to solve long term structural deficits, by sacrificing short term growth. In the name of long term structural change, governments are deflating the economy at a time when they should be doing the opposite.

The UK and US should be setting out plans to reduce the long term deficit, but this should not be involving short term cuts in spending on important capital investment. These long term policies should involve:

1. Raising retirement age in response to an ageing population.
2. Evaluating automatic health care spending in the US.
3. Seeking to move people off long term benefit (e.g. helping those on disability allowance find less taxing jobs)
4. Planned tax rises which are appropriate for incentives, efficiency and equality. e.g. US should be planning to raise tax on petrol, and tax on those high income earners who have befitted from recent tax cuts.

These kind of policies are sustainable and actually, make a big difference to long term budget situation. If you sell off assets or stop current capital investment projects, it is a very limited benefit to the long term budget. But, if you make changes to retirement age or entitlement spending this isn’t just a one off benefit, but a permanent improvement to the government’s fiscal position.

Bond yields in the UK and US are near record lows. If the government came up with plans to improve long term budget situation over next 20 years, markets would be willing to lend for short-term economic recovery.

What should Companies do When there is economic problems?

All of the following tips work towards improving your balance sheet – you want to pay out cash later and receive cash sooner. There are 4 main ways to do this:

• Reduce and slow down cash outflows.
• Increase and speed up cash inflows.
• Position your business for a recessionary environment.
• Get your team to be more productive than they’ve ever been.

Let’s get started.

I. Reduce and slow down outflows of cash.

The first step is to cut or reduce your monthly cash outflows (ie., expenses).

1. Reduce your monthly rent

Call your landlord and negotiate a lower monthly rent. Sign a longer term lease in exchange for the lower rent if you have to. Your landlord is running a business too, and they would rather have you stay at a lower rent, than to have the space be vacant for months. Point out that it’s better for both of you if they lower your rent.

2. Get a discount on utilities

Consider all your utilities like water, power, Internet, and phones. Call your vendors’ competitors and ask what kind of deal they can offer a small business looking to save money on their utilities. Let them know you’re willing to switch vendors if they can give you a big discount (even if it’s just for the first year).

The frontline sales reps will often have unadvertised discounts they can offer new customers. All you have to do is ask for them. Once you know how much you can save by switching, call your current vendors. Get them to match the offer so you don’t actually have to go through the trouble of switching.

3. Cut wasteful discretionary spending

These are the newspaper and magazine subscriptions that were a nice perk during the high-revenue years, but now nibble away at your bottom line. However, this does not meant cutting cheap but morale-boosting expenses like cake for birthdays.

Right now you need your employees to rally around the company’s survival, and a cake a month to keep morale up is well worth it. In the same vein, productivity-boosting expenses like the coffee machine or a well-stocked soda fridge are relatively small expenses where the benefits in employee productivity far outweigh the costs.

4. Lease rather than buy. (Or buy used.)

Need a new computer or office furniture? Lease it instead of buying. You will end up paying more in the long run, but in a down market, it’s all about cash flow. If your business runs out of cash in 6 months, it won’t matter that you paid less for that desk by paying the full amount up front.

When survival is the issue at hand, you, unfortunately, won’t have the luxury of doing things the “optimal” way. It might also be worth the effort to find more options of getting your equipment and further. In this economy, there may be plenty of used gear from recently closed businesses.

5. Pay payables later

Call your vendors and get better terms. For example, you may be able to get 45-day terms instead of 30-day terms. Having cash on hand for an extra 15 days may be crucial in your survival.

While you have your vendors on the phone, and especially if they won’t extend your terms, see if they will give you a small discount for paying early. 1-2% off for paying within 10 days is a typical example. Consider using a charge card to further extend your payables.

For example, if you have 30-day terms with a supplier, you can effectively extend those terms to 90-days by paying that invoice on day 30 using an American Express PLUM card. The PLUM card gives you 60-day terms with no interest. By using the PLUM card instead of a check, you’ve basically given yourself 90-day terms to pay your suppliers — without incurring any interest charges.

II. Increase and speed up cash inflows

After slicing your expenses and cash outflows, the next step is to increase and speed up the inflow of cash. Like many other businesses, you may be facing plunging revenues. Here are tips for turning that trend around.

6. Collect receivables sooner

Get cash in hand by offering your customers a discount for paying sooner. A common discount is 1-2% off for paying within 10 days instead of the normal 30 days.

Tip: Make sure you’re only offering terms (basically, free credit) to your best customers. You’re not running a credit card company. Stop giving your customers free credit at the expense of your company’s survival. Also, be aggressive (but not predatory) in your collection. In flush times, it’s easy to let a customer slide on paying their invoices on time. But you don’t have the luxury of floating free credit to your customers any longer.

If the customer is having trouble paying all their bills, you are probably competing with other collectors. Get to the front of the line by being the squeaky wheel. (It goes without saying that you should be friendly, courteous, and understanding while aggressively following up on receivables. You do want to keep their business, and using mafioso collection techniques won’t help that cause.)

7. Keep your existing customers

Don’t cut so much of your business expenses that you can no longer service your customers. Now is the time to remind your customers why they chose you in the first place. If it’s because you’re the most cost-effective, remind your customers that your low prices are even more important during the recession.

If you’re not the cheapest, but you offer a premier product or superior customer service, remind your customers of the exceptional value you offer — and that price may not be the most important factor when determining total cost of ownership.

8. Double-down on your best customers

Most small businesses are seeing new business dry up. This slowdown in new business alone is bad enough for any small business owner, but the loss of your best customers (your biggest accounts) will be nothing short of catastrophic. Call, email, or send a card to your best customers. Tell them you appreciate their loyalty and continued patronage.

Ask them to come to you if they have any concerns and are looking to jump ship. Let them know you’re willing to work with them to keep their business. Sign a long-term contract if the opportunity arises! Offer to buy them lunch or a cup of coffee to discuss your current and future relationship. It’s a lot harder to “fire” you when you’ve met face-to-face and they know you’re also concerned about their needs.

III. Position your business for the recession

The business environment in a recession is very different from the good years.  Consumers spend differently, which forces you to adjust accordingly.  Here are tips for making those adjustments.

9. Lower inventory costs

How much cash is tied up in inventory? Do you really need to have 100 units of every product sitting on your shelves, waiting for the big order? You may be able to reduce the amount of inventory you’re holding, and free up much needed cash. Can you increase the frequency of deliveries (and lower the size of each shipment) from your supplier?

That will allow you to stock fewer units on the shelves and keep more cash in your accounts. While you’re considering your inventory, maybe now is the time to liquidate the worst selling products. Speaking of your product line…

10. Revamp your product line or marketing campaign

Consumers spend differently in a recession. They want (need?) to get more value out of their purchases. Position yourself as a great value, and you’ll outlive the recession.

Note that “value” is not the same as “low price.”  It’s tempting to slash prices to drive more demand, but that’s not a sustainable practice.  Someone else will always be willing to lose more money by making deeper price cuts.  Make drastic price cutting the very last tactic you use.  Instead, change your marketing message to highlight your amazing value.

11. Look for opportunities to leapfrog competition

Your competitors are in the same boat as you. If you can swing it, this is a perfect time to launch a new initiative, take market share from your rivals, and put yourself in a position to accelerate through the recovery. (Think of it like stepping on the gas to accelerate out of a turn.)

Now is the time to up your business networking. Not only can you get advice from other business owners, but staying abreast of news and gossip gives you invaluable knowledge on what’s happening in your industry.

IV. Team productivity

People are often the most expensive part of running a small business. Of course, employees are also the source of much of the value of your business. Slashing labor costs while boosting employee productivity is not easy to pull off.  However, businesses that manage it are the ones that will survive this recession.  Here’s how you can be one of those businesses.

12. Cut once, cut deep, and do it sooner than later

Layoffs suck, but sometimes they’re essential to your company’s survival. If you do have to layoff employees, make sure you cut deep enough so you don’t have to do it again in 6 months. If you make a shallow cut and tell the remaining employees there may be more to come, everyone will be scared for their job.  A jittery team is not an effective team.

If you foresee layoffs coming in the near future, do it sooner rather than later. That conversation will be painful, but getting it over with soon has a couple of big benefits:

1) You can afford to offer a bigger severance package

2) The remaining employees can stop worrying and everyone can get back to working on turning the company around.

13. Reduce hours before reducing salaries

If you cut someone’s salary by 10% but ask them to work the same number of hours, they will resent their lower hourly wage and will (subconsciously or otherwise) reduce their productivity by the same amount or more. A better idea is to cut hours.

You’ll save the same amount of cash, but have a better chance of retaining the same level of productivity from your employees. Overtime pay is a good place to start — you’re paying 1.5x or 2x for those hours. Cutting your store hours (closing 30 minutes earlier) is another option that could mean one less employee you have to layoff. Customers may not even notice your new hours.

14. Cut your own salary

You must cut (or even eliminate) your own salary before you cut your employees’ salaries. If they don’t see that you’re sacrificing more than they are, it won’t matter that you’ve saved 20% in employee salaries — you’ll see a 50% reduction in productivity. That means you’ll actually be paying more for those employees because of the reduced productivity.

15. Get everyone on the same page

Be open with your employees. Cultivate an attitude of “we’re going to weather this downturn together.” Go ahead and show them the books (or at least an overview) so they can see that ugly chart of dwindling (or heaven forbid, negative) cashflow.

Don’t be afraid to say “we all need to be 10% more efficient and 10% more productive (ie., make 10% more while spending 10% less), or else none of us will have a job in 6 months.” Just including them in the problem-solving process is often enough to motivate them to give that extra effort during tough times.

Keeping your business afloat during the current economic condition is difficult, but not impossible. Have realistic goals and plan for being in survival mode for perhaps 2 or more years (not just the next few months). Cut deeper than you think you need to because it will be worse if you have to go through this process again in 6 months.

Can you Start a Business in a Recession?

Yes, you can still start a small business during a recession. Some small businesses even thrive in a difficult economy. These businesses are called counter-cyclical or recession-proof businesses.

Starting any small business during a recession is a baptism by fire, but if you can survive, you will thrive as the economy recovers.

1. Accounting Services

Who would guess that accounting services would prosper in a recession? Rich Walker, an executive with Intuit, once said in an interview that having an accountant as a close business advisor during uncertain economic times gave the.small business more confidence in handling its financial affairs, particularly at tax time.

2. Bulk Food Sales

When economic times are tough, many people buy food in bulk. They buy large quantities of items like flour, sugar, laundry detergent and any other staple products they use on a long-term basis. A good idea for a small business is a bulk foods operation that services these bulk shoppers.

3. Affordable Luxury Items

Affordable luxury items seem like a contradiction, but they don’t have to be. During a recession, people tend to feel deprived. Starting a small retail operation that sells mid-level luxury chocolate instead of top-level luxury chocolate, for instance, might do very well. An ice cream shop that sells cut-above regular ice cream, but in small quantities, might prosper. You could start a travel agency that specializes in affordable, yet luxurious or special vacations.

4. Debt Collection Agency

An obvious business to start during a recession is a debt collection agency since many people can’t afford payments on credit cards or other debt during a recession. To reduce your overhead costs, you can run this type of business out of your home.

5. Resume-Writing Services

During a recession, unemployment is high. Many people lose their jobs. Along with unemployment, underemployment (where people aren’t working up to their potential) is also rampant. Everyone is looking to polish up their resume. There is a demand for experienced resume writers, another business you can run out of your home.

6. Auto Repair Services

Auto repair services grow by leaps and bounds during a recession. The last thing people want to do during a recession is to make a large purchase like a car. They try to keep their current cars running instead.

If you are an unemployed auto mechanic or if you are a business manager who wants to start an auto repair business, you’re in luck during a recession. It’s probably one of the best businesses you can start.

7. Home Staging

Staging a home before you sell it has become a hot business. During a recession, it is especially difficult to sell a home.

A home stager is very important. Simply put, a home stager makes your house look good and appealing to possible buyers. They know what buyers want and how to make your home appeal to them. If you are an interior decorator, this is a recession-resistant business for you.

8. Virtual Assistant

It wasn’t that long ago that the job of Virtual Assistant simply didn’t exist. During a recession, this job tends to grow as companies may choose not to hire expensive support staff people on site. As a result, they have had to outsource many functions.

The Virtual Assistant may serve as an administrative assistant to executives, CEO’s, entrepreneurs, or entire businesses. The communication is done online and on the telephone.

9. Tutoring Services

Tutoring services is another job that is virtually recession-proof. Many individuals go back to college when the job market is tight. As different sorts of jobs become available, such as jobs in green industries, tutoring services are going to be even more in demand. If you are a tutor, you can conduct your business online, in person, or both, which makes it very versatile. If your field is a popular field, then all the better as your services will be in high demand.

10. Food Truck

Would you like to start a business serving food but you feel like the entry costs of starting the business are too high? Consider a food truck. You don’t have the cost of buying a franchise or an existing sit-down restaurant. You may be able to find a used truck that you can spend a minimal amount fitting it to suit your needs.

In the time of social distancing, your customers can order and eat at a comfortable distance from each other.

11. Repair Services Professional

During a recession, people need repair services because they don’t usually have the money to buy new things. Maybe someone has a leaky roof that can be patched instead of the entire roof replaced. There are clogged sinks and clogged plumbing. Problems with appliances.

Any number of small things that don’t require licensed professionals, at least not in the short-run. This is a business where there is almost no initial investment unless you need to add to your tool collection, and you can earn money fairly quickly.

Who Benefits in a Recession?

A recession is a period of negative economic growth. An economy that had been booming experiences a slowdown and the effects trickle down to everyone, from business owners to shoppers picking up their weekly groceries.

There are at least four benefits a recession could have for you and the economy as a whole, even if it stings in the process.

1. Some businesses thrive

There may be no such thing as “recession-proof” industries, but there are some that historically do better than others. For example, here are some businesses that tend to do well in a recession:

• Bankruptcy attorneys. According to The American Lawyer, law firms are currently busy building up their bankruptcy practices in an effort to be fully staffed when the next recession arrives. Few businesses are more likely to get clients than a law firm dealing with bankruptcy during an economic downturn.
• The sweets industry. The consumption of candy increased dramatically during the Great Recession of 2007-2009. In fact, in 2008, profits in Cadbury increased by 30% and Nestle reported a profit increase of nearly 11%. Fun fact: Tootsie Pops, Mars Bars, and Snickers were all invented during the Great Depression.
• Maintenance services. Rather than buy something new, consumers opt to repair things that break during a recession. This may lead to making repairs to a high-mileage car rather than replacing it, or calling a repairman out to work his magic on a tired old furnace.
• Grocery stores. Economic instability leads to less splurging, including less eating out. With more people cooking at home, grocery stores benefit. 
• Bars. Binge drinking increases during tough economic times, according to the National Institutes of Health. Although overall alcohol consumption decreased during the last recession, binge drinking — particularly among non-black, unmarried men under 30 who had recently become unemployed — increased.  

Other winners in a time of recession tend to be retail consignment shops, certain investors who catch bargains in stocks and real estate, and realtors specializing in foreclosed properties.

2. Efficiency increases

Inefficient companies simply find it too difficult to stay afloat when sales lag. Economic declines remind companies to jettison excess inventory and cut their overheads. It teaches them to streamline processes in a way that saves on costs but still meets the needs of their customers.

3. It balances everyday costs

Just as high employment leads companies to raise their prices, high unemployment leads them to cut prices in order to move goods and services. People on fixed incomes and those who keep most of their money in cash can benefit from new, lower prices.

Imagine what would happen if the economy never slowed. Unchecked, growth leads to higher wages — which may sound great until you realize that those higher wages can cause high inflation and push up the costs of everyday goods. The more everyday goods cost, the less certain consumers can keep pace. Recession brings the entire process to a crawl long enough to reset prices to a more manageable level.

4. It changes our mindset

Nearly all of us will be impacted by a recession in some way. During times of economic downturns, Americans are reminded of how important it is to live below our means (or at the very least, within our means). It prods us to save for the next rainy day, keep our emergency funds topped up, and to reevaluate how we manage money.

People save more during recessions. That does not help economic recovery, but given that only one-fifth of Americans are confident they can last more than three paychecks, a lot of people would benefit from saving more.

How Can I Protect my Small Business?

Whether you are just starting your new business, or have been up and running for a while, protecting the business you worked so hard to build is a critical step. Unfortunately, it’s one that many entrepreneurs neglect in the rush of launching a startup and operating day-to-day. Here are seven steps you can take now to protect your small business.

1. Choose the right form of business. Operating as a sole proprietorship—the default business structure for a one-person business—may be easy, but it’s not necessarily the best choice to protect your business.

For one thing, the sole proprietorship structure doesn’t protect your personal assets. That means if a customer decides to sue you or a vendor demands payment that your business can’t afford, your savings, home and other assets could be fair game.

2. Hire an attorney. You may not need to use a lawyer that often, but when you need one, you need one fast. Ask other entrepreneurs, business colleagues, and friends for recommendations to attorneys who are familiar with small business issues.

Take the time to compare attorneys by scheduling an interview with each before you hire them. Discuss payment options—most attorneys have affordable solutions for even the smallest business.

3. Find an accountant. Even if you plan on doing the bookkeeping yourself, a good accountant is worth the price. Who has time to keep up to date on tax law changes? You sure don’t—but accountants do.

Not only can they save you money on your taxes, they can also provide valuable advice on how to structure your business, the best way to finance expansion, and how much to pay yourself. At my company, we consult our accountant before making any big decision.

4. Be smart about new customers. Before taking on a new B2B customer, always conduct a credit check. This helps protect you against unpaid invoices. Never do business without a contract—no matter how confident you are in the customer’s word. If something goes wrong, a written contract may be the only thing that ensures you get paid for your hard work.

5. Buy business insurance. Most businesses need general liability insurance, and if you provide advice or professional services to customers, you may also need professional liability insurance, also known as E&O (errors and omissions) coverage.

Depending on which state you operate in, you may be required to have workers’ compensation insurance. Other insurance products to consider include key man insurance on your life and the life of other key employees, business interruption insurance (which protects your income if your business has to shut down due to a disaster) and cyber insurance.

6. Protect your employees. Disaster can strike any time, so it’s important to have a disaster plan for what you will do in case of emergency to protect your business.

Create a plan and assign responsibilities for how to get employees and customers out of the building safely, what to do if a disaster keeps you and employees from getting to your business, and how you will keep running even if you can’t get to your location.

7. Protect your business data. Back up your company data and documents with a cloud storage and sharing solution so you can access files anywhere. When your information is stored in the cloud, you don’t have to worry about a crashed hard drive or fire on your premises wiping out precious data.

To protect your small business from cybercrime and hackers, install appropriate firewalls and, more importantly, train your employees in cybersecurity measures, such as creating using strong passwords.

What Are The Most Effective Strategies For Promoting a Small Business Research?

1. Content Marketing

18% of marketers say that content marketing has the greatest commercial impact on their business of any channel in 2016.

Content marketing is the process of creating and distributing valuable, relevant, and consistent content to attract and retain a clearly-defined audience and drive profitable customer action.

Unlike paid advertising, content marketing focuses more on long-term results. The initial payoff tends to be low, but the long-term, sustainable growth in visitors, leads, and customers can single-handedly carry a business.

Content marketing is not easy, however, and requires every element to be done right:

• Quality content
• Relevant topics
• Optimized for SEO
• Optimized for readers
• Consistent content creation & promotion

Content is not limited to blog posts. It includes videos, podcasts, online courses, and a host of other mediums in which people consume information.

If you are considering this strategy for your own business, make sure you have the time and capital needed to get going with no initial ROI, and then DO YOUR HOMEWORK. Too many businesses these days are just wasting resources creating mediocre content with no payoff, now or ever.

2. Google My Business

Ranking your Google My Business (GMB) listing is one of the most powerful things you can do for your business. In fact, if you run a local business targeting local clients, I would dare to say it is THE most powerful strategy available to you.

If you can rank your GMB listing in these top 3, you can pull in large numbers of highly qualified leads day in and day out without needing to spend a dime on ads.

Google My Business combines all your different Google platforms into one central place, which includes your Google+ profile, Google Maps profile, your Google reviews, access to data on Google Analytics and Google Insights, and more.

3. Organic Social Media

Using social media for business is really a non-negotiable.

67% of consumers use social media for customer support, and 33% prefer using social media instead of the telephone. If people can’t find your business via social media, they will look for your competitors who ARE present on preferred social channels.

The real question isn’t whether you should have active social media accounts, it’s how much time and resources you should be investing in growing your social audiences. For some businesses, it makes sense to invest heavily in organic social media growth.

For example, Instagram users that follow fashion influencers are actively looking to purchase new styles. By building an active, fashion-savvy audience, a clothing retailer can build a consistent direct sales channel. For other businesses, investing in Instagram might not make sense.

The key is identifying where your customers are and how they like to be approached. If social media is the answer to both those questions, it’s the perfect channel for your business.

4. Email Marketing

Email marketing is the cornerstone of digital marketing.

Most of the people who visit your site will not buy from you immediately. Capturing contact info for additional marketing and “lead nurturing” is the best way to sell in 2016, and email remains the highest converting channel for interacting with leads.

Email marketing funnels begin with a “lead magnet”. This is something compelling you offer your website visitors in exchange for their email addresses. Possible options include a free digital download, a free service trial, a “seat” at a webinar, site membership, a coupon, etc.

HubSpot offers a reliable and feature-packed email marketing tool that’s suited for growing businesses — for free. The tool allows you to create professional marketing emails that engage and grow your audience. You can start from scratch, with the easy drag-and-drop email builder, or use one of the goal-based templates available. 

Other benefits of email marketing include:

• Low cost
• Global reach
• Easy to automate
• Easy to segment
• Immediate communication
• Easy to setup and run
• Easy to track and optimize

There are a lot of marketing channels that are hard. As you may have noticed from the above list, email marketing is one of the few that can be described as “easy”.

5. Partner With Other Businesses

Teamwork is always more effective than singular effort, and combining resources with another business can help you do things you could never accomplish on your own.

It’s typically best to target companies in your local area, even if your clientele isn’t local. Your goal is to work out a complementary arrangement that provides mutual benefit for both businesses.

Some joint venture examples include:

• A PPC agency could partner with a CRO agency to refer clients to each other.
• A coffee shop could offer free coffee vouchers to a plumbing company’s customers.
• A marketing company could partner with an accounting firm to recommend each other’s services during new client onboarding.
• A beauty therapist could offer free manicures for a hair stylist’s clients.

There is really no limit to what’s possible. Simply identify crossover in your audience and a non-competitor’s audience and then find a way to tap into that crossover in a mutually beneficial way.

What Should The Government do to Benefit Small Businesses?

Helping small businesses start and thrive is a win-win situation for the government. Local businesses help support the tax base through businesses taxes and through the wages provided to employees.

The possibility of workforce expansion and economic growth prompts municipalities, counties, states and the federal government to offer various forms of assistance, such as grants, research opportunities, beneficial legislation and worker training programs.

To find out what services are available in your area, contact your state and local economic development offices and ask about business incentives in your area.

Economic Development Programs

Some government programs help businesses start, grow and relocate to specific areas. In some ways, local, county and state governments compete with each other for jobs. They do this by offering start-up incentives and taking steps to create a “business-friendly” environment.

These steps include tax credits, worker training, free land, zoning changes, low-interest loans, infrastructure improvements and help with fast-tracking licensing and permitting.

Loan Guarantee Programs

Government agencies such as the U.S. Small Business Administration provide loan guarantees to small businesses and encourage local banks to work with start-ups or established companies that want to expand. Talk to your banker about state or federal loan programs that offer low-interest rates.

If you are a woman, a minority or operate a business in select industries, additional loan opportunities also may be available. Contact your state’s economic development office to learn if it has loan programs.

Research and Development

The federal government provides grants to academic institutions working to develop new technologies that will benefit industry with the caveat that the institutions share the technologies with industry.

In some instances, the government provides grants to private companies making a new product or service that will improve a vital area of an economy, such as transportation, energy, agriculture or communications. Some states also fund research and development projects and work with private investors and the federal government to raise funds.

Infrastructure Improvement Funding

Business does better when it can move raw materials to factories efficiently and get finished goods to plants and markets quickly. Governments help improve the infrastructure needed for businesses to succeed. This includes building and maintaining roads, bridges, rail lines, airports, seaports, energy transmission lines and telecommunications systems.

Education and Training Programs

To ensure businesses have access to trained workers, governments provide free schooling for primary and secondary students, grants, and loans for higher education and worker training programs. Governments often work with trade schools, community colleges, and universities to provide free worker training.

What Are The Ways in Which a Government Can Support SMEs?

Here’s a look at some of the key ways in which public efforts are being made to assist SMEs.

1. Home office support

The government recently introduced new rules relating to home offices with the aim making it considerably easier for entrepreneurs to establish businesses from their own rented accommodation.

The new laws provide reassurance for landlords that their tenancy terms will not be undermined when a business is being run from a rented residential property. Plus, that process will not now tend to require planning permission or attract business rates of any kind.

Figures suggest a sizeable majority of new businesses in Britain begin life in residential property and the latest estimates are that they contribute close to £300 billion annually to the UK economy. No surprise then that the Government is keen to see home-based start-ups afforded every opportunity get established and to grow without any unnecessary hindrance.

2. Raising investment for growth

In recent months the government upped its financial support for a scheme designed to deliver loans and funding to start-up companies around the country by £30 million. The Start-Up Loans operation provides financial opportunities to fledgling companies but also advice on business plans and mentoring for ambitious entrepreneurs aged between 18 and 30.

Meanwhile, the Enterprise Finance Guarantee scheme continues to open up access to funding for SMEs in their third year of operations as they aim for growth. These targeted loans are available at a level of up to £25,000 and they’re designed to give viable small businesses a chance to raise the kind of finance they need to fully pursue opportunities in their respective sectors.

3. Advice for growth

Accessing the right funding can be crucial to the prospects of SMEs around the UK but so too can accessing the right kind of advice and expert support. With this in mind the Government has created what it calls the Growth Voucher Scheme that offers small companies ways to secure advice on key issues from finance and cash flow to recruitment and staff development, and from marketing to making the most of digital technologies.

With similar aims in mind, the government-backed Growth Accelerator scheme looks to provide support and guidance to SMEs that are struggling to maximize the growth potential of their businesses.

4. Recruiting for growth

Knowing when, how, and who to recruit as a small business boss can be very difficult and amounts to one of the key challenges that many SMEs face in the early stages of their development. In order to limit the potential financial ramifications, the government has cut the cost of hiring via a £2,000 employment allowance and offers grants worth £1,500 for the first ten apprentices an SME takes on between the ages of 16 and 24.

5. Innovating for growth

Being able to innovate effectively is important for any business but for SMEs it can often be the difference between steady progress and complete failure. To support small companies in this respect, the government is offering SMEs the chance to claim up to 225 per cent tax relief on research and development costs, as well as Smart Grants worth up to £100,000 and Innovation Vouchers of up to £5,000.

Figuring out how any or all of the above can help your company’s prospects might take a little time and investigation but with the right approach, there’s every reason to think that your business might be able to benefit from government support or official legislation.

A vital first step is to find out what help is available and then to keep asking questions until you get the answers you need on the specific subjects that mean the most to your business.

Possible Initiatives to Protect Small Businesses During Covid-19 Pandemic

To keep your company healthy during the coronavirus outbreak and positioned well for success when it’s over, take advantage of these seven contingency and business planning tips.

1. Put health and safety first

If you’re a solopreneur or sole proprietor, prioritize your health first. Limit your travel and maximize home office communication and collaboration tools.

If you have employees, keep them informed of travel restrictions, government announcements, and offer them work from home options. If that’s not feasible and your business is considered essential, take steps to minimize virus transmission risk at your place of work. This includes social distancing, splitting shifts, and frequent sanitization.

It’s also wise to establish procedures for staff to report if they are feeling unwell, are absent, or if they suspect exposure to the coronavirus or infection.

2. Assess the impact on operations

What will happen to your business during this crisis? To help answer that question, run best-case and worst-case scenarios and develop contingency plans for each. Include timeframes in your assessment that consider the impacts of the pandemic if it becomes a three-month, six-month, or one-year problem.

For example, if critical personnel became sick or had to look after family members, how will your business accommodate these changes? Try to identify others who can step in and learn key tasks such as retirees, family members, or independent contractors and freelancers.

If your customers close operations for a few weeks or months, what impact will that have on your revenue forecast and sales cycle? Likewise, if government authorities require that you cease or adjust operations, what adjustments could you make to protect employees, revenues, and continue to serve customers?

Telework has skyrocketed during this crisis and should be accounted for in your plan. Implement work from home policies and technologies that support collaborative and secure at-home work (home networks and devices are susceptible to security vulnerabilities).

3. Reach out

Develop a communication plan to reach out to your clients, partners, suppliers, investors, and other stakeholders. Keep them abreast of your business policies at this time, any changes to operations, or new ways you can serve or collaborate with them.

4. Be ready to adapt

COVID-19 is changing our lives in ways and at a scale we could never have imagined. The business plan you had 90-days ago isn’t what it is today. You need a plan to adapt and reconfigure your business for each stage of this crisis. If it’s a short-term problem, then cutting costs and other variable spending like marketing, new hires, and travel may help you through.

If your business has seen immediate impacts, look for ways to support your client needs or diversify your products and services during this time. For example, dog walking companies are keeping revenue flowing in creative ways.

Some are helping clients in vulnerable age and health groups by doing their grocery run. Others are finding new clients among at-risk groups or families with home-schooled kids who are suddenly in need of a dog walker.

It’s hard to look and plan too far ahead. However, if the pandemic and lockdowns continue for several months to a year, then you need another contingency plan; one that looks at renegotiating fixed expenses, cutting benefits, even layoffs.

5. Evaluate your finances

Any emergency or contingency plan should account for financial risk and impacts. Regularly update and track your cash flow forecast and look for opportunities to reduce non-critical expenditure. Also, review your accounts receivable and assess any credit risks.

Do you have a financial safety net that you can draw on? Many business owners have savings they can draw on. Another option is to secure a business line of credit before you need it, so you can draw on funds during a disaster or pandemic.

Alternatively, consider small business financial assistance programs to help you cover business expenses such as those administered by the Small Business Administration (SBA). Under the CARES Act, the SBA is providing low-interest disaster recovery loans up to $2 million to businesses impacted by the situation.

These loans, funded by banks but guaranteed by the SBA, can be used to pay fixed debts, payroll, accounts payable and other bills. Long-term repayments up to a maximum of 30 years keep payments affordable.

The CARES Act also offers small business owners a $10,000 advance on an Emergency Economic Injury Disaster Loan (EIDL) that does not have to be paid back. The program provides loans up to $200,000.

In addition to SBA loans, the federal government is also offsetting paid sick and paid leave costs for employers with an employer tax credit, equal to 100% of benefits paid. Self-employed individuals will also benefit from an additional $600 in unemployment insurance for up to four months – an important safety net that they generally don’t qualify for.

Some states have also implemented financial assistance for the self-employed. In Iowa, for example, sole proprietors and single-member LLCs that can demonstrate COVID-19 impact can qualify for grants between $5,000 and $10,000.

6. Stay on top of the fast-changing compliance landscape

If you operate an LLC, keep an eye on shifting developments at the government level that directly affect your work such as filing documents and turnaround times. Many Secretary of State offices have eliminated expedited services, while others have removed or greatly restricted counter service.

Having a remote workforce can also introduce new state compliance requirements that must be considered such as state payroll and income tax filing, or the need to register to do business in a new state.

7. Be prepared for the light at the end of the tunnel

With your employees safe and healthy, and your operational and financial impacts mitigated as best you can; take stock and think about how you’ll successfully restore operations when the COVID-19 pandemic is over.

This is likely to be a life-changing event that could bring a wealth of new opportunities for startups and small business owners. Look for immediate gains like renegotiating contracts with suppliers and vendors. Listen to your customers and find ways to serve them.

Find ways to introduce greater efficiencies into your business, such as reducing your physical footprint by making permanent your work from home policies. And consider your financial situation.

How Can Small Business Survive in a Dynamic Industry?

1. Small business needs a niche

Entrepreneurs do not have the resources (mostly cash) to be lots of things with lots of people. Instead, be focused. Know what you offer and where it would be valued.

Start out with a specific product or service that serves specific needs of specific customers. Prove that what you offer is valued by generating profitable sales. Once a firm base of customers is established, revenue is coming in, and profits are falling to the bottom line, then consider expanding beyond the niche.

2. Small business is quick

Nature has given every species on the planet some proprietary defenses. The large are often slow, and the small are often fast. In the business world, an advantage available to small businesses is their speed and their ability to adapt quickly to changing situations and customer needs.

This rapid ability to respond is powerful both offensively and defensively. If a customer needs change or new market opportunities present themselves, a small business can quickly answer the call.

If a major competitor decides to dominate a market, a small business can alter its path to avoid being overrun. The key for the entrepreneur is to stay attuned. Don’t get so buried in the daily aspects of the company that you fail to see what’s going on around you.

3. Small business needs to know its numbers

Numbers tell the unvarnished truth about how a business is doing. Many companies use key performance indicators (KPIs). These are the numbers that, if met, indicate the business is healthy and growing. Examples of KPIs are varied, but some common ones are cost of customer acquisition, margin percentages, revenue per employee, inventory turns and cost of goods.

The key for the entrepreneur is to know what numbers are the bellwethers for their business. Track them, stay tuned to what impacts them, and continually strive to make them stronger. If the key numbers for the business are strong, the rest of the numbers should be strong as well.

4. Cash is king

Without positive cash flow, a small business will spiral down under an ever-increasing financial burden. If just starting, make sure there is enough capital to cover at least up to double what you think you need.

Get the product to market as quickly as possible, and produce some profitable sales that feed positive cash flow. If some aspect of the business is draining cash without a foreseeable turnaround, cut losses quickly.

Being an entrepreneur and running a small business is a consuming enterprise. The demands are many and the resources are few. However, the rewards can be great. Prove that your product is valued, stay attuned to the customer and marketplace, let the numbers be your guide, and protect your cash. If you do, the odds of beating the odds are on your side.

Providing Necessary Support to Avoid Suffocation by Huge Chains

The Small Business Administration identified that there are more than 28.2 million businesses operating in the United States as of March 2014, with about 63% of new jobs being created from small businesses between 1993 and mid 2013.

Of these 28.2 million businesses, most are “self-employed” – making up about 3/4 of the U.S.’s total businesses. Meanwhile, approximately half of small businesses survive five years or more, many of which make up your local coffee shops, favorite local boutiques, preferred chiropractor or local pet shop.

But why should we support local businesses? What makes them so powerful that it will change our outlook on big companies for the better? Take a look for yourself.

1. It shows you care about your local community

The number one perk to consider, for obvious reasons, is that supporting local means that you care about the community that you live in. You’ll be able to put money back into your community and the other people who call it home, too. It’ll give your local economy a chance to thrive, too.

2. It shows respect to the business owners

Local business owners don’t have the funds to go big or go home, so when you buy local you are going to be respecting that they are getting out there every day and trying their best to make an honest living even against all of the competition out there.

There is a lot to be said for that. Shopping with a local business — regular shopping, that is — shows them the respect that you have for them and their attempts at doing things the right way.

3. You’re helping bring character to the commercial world

The commercial world is full of companies that all offer basically identical options. It’s hard to find anything that is entirely unique anymore. When you drive across the country, and all you see is the same scene… same brand, same big box stores, same products on the shelves. Very disappointing, isn’t it?

However, when you are going off the beaten track and looking at local options, you’ll find that you will be able to get that character that you want and need for a gift or just something special for yourself and your home.

4. You’ll get unique products

Unlike big corporations, shopping local is going to offer you unique products that will be as incredible as you think they will. You’ll find unique twists on traditional possessions, or entirely unique ideas that create products that you never even knew you needed before you saw them in that shop.

There are lots of local makers who bring their personal experiences, skills, and creativity to their products. Take the time to go to a local market event sometime and you’ll find out how these local people bring the soul to their products. And believe me, it might just make your day.

5. They always want the best final result, not your money

There’s no secret about it, a big company is going to be all about the money. They only care about making a final profit so they can get richer and pay their shareholders a fat return on their investment. Not to mention that lots of them provide lower quality products that are less fresh and full of trashy ingredients.

A local company is more than that. They’ll guarantee you a product that is the real deal. A reliable purchase that will promise you quality and a fresh twist on something that you saw by a big brand elsewhere.

Sure, you’ll maybe pay a bit more for it, but the money is going to go back into the business to give it the ability to succeed in the future as well as keep the money flowing in the local ecosystem.

6. You are giving people jobs

There’s no question that the job market is tight these days, and by shopping locally, you are keeping a business open (one that cares about you) and giving people jobs within it so that you can help the local economy in more ways than one.

So think about that next time you debate between one option at a local shop versus one that is slightly cheaper at a big box store. Think about the people that you help employ.

What Are 4 Ways The Government Can Foster Entrepreneurship?

Government and business are inextricably linked, with the actions of one often imposing consequences on the other. It is in the government’s best interest to keep the economy healthy by, among other things, ensuring an encouraging environment for small and large businesses.

This being the case, the government has a number of tools at its disposal to encourage business activity throughout the economy or in specific industries.

1. Lower Interest Rates

The Federal Reserve can alter the Federal Funds Target Rate – the figure that directly influences the prime interest rate – to stimulate lending to businesses and consumers. When the prime rate dips, borrowing becomes more profitable. This encourages businesses to expand, and allows consumers to experience temporary increases in discretionary income.

2. Give Tax Incentives

Aside from the age-old argument that lower corporate income taxes encourage business activity, the government has other techniques in its tax toolkit that can stimulate specific industries. Tax incentives to certain types of businesses, or incentives for consumers who patronize certain industries, can give fledgling markets a powerful boost.

A prime example of this is the business and residential solar power industry. Tax incentives encourage entrepreneurs to start new solar power businesses, and incentives to purchasers encourage small businesses and families to purchase solar equipment.

3. Friendly Trade Policies

Foreign trade policies, such as tariffs and import quotas, can be lowered or eliminated to encourage foreign trade. Relaxed trade restrictions and free-trade zones can allow local businesses to realize significant cost savings, allowing them to increase their bottom lines.

The ability to outsource labor and manufacturing to lower-cost markets in addition to sourcing cheaper materials helps to increase profit margins, encouraging business expansion.

4. Providing Contract Work to Private Companies

Government entities directly encourage business activity when they contract with private companies to perform government responsibilities. Counties, for example, can contract with third-party road pavers, snow plowers and towing services rather than creating internal departments for these activities. At the federal level, contractors are used for war-zone logistics and intelligence processing, among other things.

5. Grants, Loans and Disbursements

The government has access to an entire population’s worth of individual and business tax money, and has the ability to distribute that money to affect change throughout the economy.

Loans and grant programs offered directly to entrepreneurs are one way to use tax revenue to stimulate business activity. Another way, according to America.gov, is to fund agencies and programs such as the Small Business Administration, which provide assistance to startup entrepreneurs.

Unemployment and other federal assistance benefits ensure that a large number of people have enough money to pay their bills, leaving them with extra discretionary income that generally falls into the hands of businesses.

How Does The Government Encourage Production?

Government subsidies help an industry by paying for part of the cost of the production of a good or service by offering tax credits or reimbursements or by paying for part of the cost a consumer would pay to purchase a good or service.

Effect of Subsidies on Supply

Governments seek to implement subsidies to encourage production and consumption in specific industries. When government subsidies are implemented to the supplier, the industry is able to allow its producers to produce more goods and services.

This increases the overall supply of that good or service, which increases the quantity demanded of that good or service and lowers the overall price of the good or service.

In this sense, when the government gives subsidies to the supplier, what results is a win-win situation for both the supplier and the consumer. Essentially, the supplier is benefitting as if the good were selling at a higher price and is able to produce more of the product.

Meanwhile, consumers get to enjoy the product for what would be a comparatively cheaper price, since suppliers do not need to charge exorbitant rates to break even on production.

Since the government helps suppliers through tax credits or reimbursements, the lower overall price of their goods and services is more than offset by the savings they receive.

Tax Credits

On the consumer side, government subsidies can help potential consumers with the cost of a good or service, usually through tax credits. For example, a great example of this is the transition to more renewable sources of energy. With still nascent models of green economics, the current demand to purchase new energy-saving technology is low.

In order to sway consumer interest, government subsidies or tax credits can help with this high cost of adoption. When consumers refit their houses with solar panels, the government will provide a tax credit to individuals and families to offset the high price of purchasing the new solar panels.

In this sense, consumer-targeted subsidies will not necessarily increase supply, since producers aren’t being motivated or compensated to produce more. However, tax credits will offset higher prices for consumers so that the margin still goes back to producers.

In the same vein, some states also provide a tax credit or subsidy for buying an electric or hybrid vehicle. This helps the renewable energy industry by allowing more consumers to purchase the products associated with that industry, without having to absorb the entire cost.

Government subsidies can help industry on both the supplier side and the consumer side, no matter on which end they are implemented. To implement subsidies, governments need to raise taxes or reallocate taxes from existing budgets. There is also an argument that incentives in the form of subsidies actually reduce the incentives of firms to cut costs.

However, whether it’s by increasing supply through supplier-side subsidies, or helping consumers with high costs of adoption through tax credits, it’s clear that government intervention in market economics has real-life impacts on both parties alike.

How do Small Businesses Affect The Economy?

In a strong economy, nearly all businesses enjoy greater prosperity. Disposable income is high, unemployment is low and consumer confidence prompts people to pump their money back into the economy through the purchase of essential and nonessential goods and services.

The impact of a strong economy on a small business is two-fold: as business increases, so too does the need for a small business to keep pace with demand by hiring additional employees, expanding retail space or adding new product lines.

While this may be viewed as a positive, the downside is that if the economy starts to falter, many small businesses find themselves overextended, which can result in mass layoffs and business failures.

During an economic slowdown, many small businesses face a number of challenges. Consumers become concerned about their job stability and, in turn, are more likely to be cautious with expenditures, which leads to decreased revenue for small business owners.

A slow profit stream can make it difficult for a small business to repay creditors, which can negatively impact its long-term viability. A business facing financial struggles is far less likely to qualify for loans for capital expenditures and operations, which limits growth opportunities.

Many small businesses also are forced to downsize their workforce during a slow economy. This limits their ability to serve customers and contributes to the unemployment rate, which furthers slows the economy.

Economy-Related Business Opportunities

Some types of small businesses thrive in a slow economy. For example, companies that are involved in facilitating home foreclosures and vehicle and property repossessions find their businesses on an upswing during a slow economy.

Additionally, small business owners with solid and substantial financial backing may see an increase in expansion opportunities by buying out their struggling competitors or absorbing the customer bases of out-of-business competitors.

Economic Adaptation of Small Businesses

Small businesses have an advantage over large businesses when it comes to adapting to economic swings. Small businesses typically have a smaller decision-making base in terms of leadership. Whereas a large company may need to call numerous stockholder meetings to discuss changes in business strategy and direction, a small business is much more nimble in the decision-making process.

Typically, a small business can make faster decisions to change course, increase or decrease workforce or product offerings or significantly change the company image to adapt to a changing economy.

What Are The Problems Faced by Small Businesses?

There are many standard challenges every business faces, whether they are large or small. These include things such as hiring the right people, building a brand, developing a customer base, and so on. However, there are some that are strictly small business problems, ones most large companies grew out of long ago. Here are the five biggest challenges for small businesses.

1. Client Dependence

If a single client makes up more than half of your income, you are more of an independent contractor than a business owner. Diversifying your client base is vital to growing a business, but it can be difficult, especially when the client in question pays well and on time. For many small businesses, having a client willing to pay on time for a product or service is a godsend.

Unfortunately, this can result in a longer-term handicap, because, even if you have employees and so on, you may be still acting as a subcontractor for a larger business. This arrangement allows the client to avoid the risks of adding payroll in an area where the work may dry up at any time.

All of that risk is transferred from the larger company to you and your employees. This arrangement can work if your main client has a consistent need for your product or service. However, it is generally better for a business to have a diversified client base to pick up the slack when any single client quits paying.

2. Money Management

Having enough cash to cover the bills is a must for any business, but it is also a must for every individual. Whether it is your business or your life, one will likely emerge as a capital drain that puts pressure on the other. To avoid this problem, small business owners must either be heavily capitalized or able to pick up extra income to shore up cash reserves when needed.

This is why many small businesses start out with the founders working a job and building a business simultaneously. While this split focus can make it difficult to grow a business, running out of cash makes growing a business impossible.

Money management becomes even more important when cash is flowing into the business. Although handling business accounting and taxes may be within the capabilities of most business owners, professional help is usually a good idea.

The complexity of a company’s books increases with each client and employee, so getting an assist on the bookkeeping can prevent it from becoming a reason not to expand.

3. Fatigue

The hours, the work, and the constant pressure to perform wear on even the most passionate individuals. Many business owners—even successful ones—get stuck working much longer hours than their employees. Moreover, they fear their business will stall in their absence, so they avoid taking any time away from work to recharge.

Fatigue can lead to rash decisions about the business, including the desire to abandon it completely. Finding a pace that keeps the business humming without grinding down the owner is a challenge that comes early (and often) in the evolution of a small business.

4. Founder Dependence

If you get hit by a car, is your business still producing income the next day? A business that can’t operate without its founder is a business with a deadline. Many businesses suffer from founder dependence, and it is often caused by the founder being unable to let go of certain decisions and responsibilities as the business grows.

In theory, meeting this challenge is easy—a business owner merely has to give over more control to employees or partners. In practice, however, this is a big stumbling block for founders, because it usually involves compromising (at least initially) on the quality of work being done until the person doing the work learns the ropes.

5. Balancing Quality and Growth

Even when a business is not founder dependent, there comes a time when the issues from growth seem to match or even outweigh the benefits. Whether a service or a product, at some point a business must sacrifice in order to scale up. This may mean not being able to personally manage every client relationship or not inspecting every widget.

Unfortunately, it is usually that level of personal engagement and attention to detail that makes a business successful. Therefore, many small business owners find themselves tied to these habits to the detriment of the company’s development.

There is a large middle ground between shoddy work and an unhealthy obsession with quality; it is up to the business owner to navigate the company’s processes toward a compromise that allows growth without hurting the brand.

What Are The Three Key Ways in Which Small Businesses Contribute to The Economy?

Small business constitutes a major force in the U.S. economy. There are more than twenty-seven million small businesses in this country, and they generate about 50 percent of our gross domestic product (GDP).

The millions of individuals who have started businesses in the United States have shaped the business world as we know it today. Some small business founders like Henry Ford and Thomas Edison have even gained places in history. Others, including Bill Gates (Microsoft), Sam Walton (Wal-Mart), Steve Jobs (Apple Computer), Michael Dell (Dell, Inc.), Steve Case (AOL), Pierre Omidyar (eBay), and Larry Page and Sergey Brin (Google), have changed the way business is done today. Still millions of others have collectively contributed to our standard of living.

Aside from contributions to our general economic well-being, founders of small businesses also contribute to growth and vitality in specific areas of economic and socioeconomic development. In particular, small businesses do the following:

• Create jobs
• Spark innovation
• Provide opportunities for many people, including women and minorities, to achieve financial success and independence

In addition, they complement the economic activity of large organizations by providing them with components, services, and distribution of their products.

Problems And Solutions of Small And Medium Enterprises

the factors working against the development and growth of SMEs are quite numerous among which are the following:

1. Financial Constraints:

Funding is a major problem with SMEs. However, the problem is not so much the sources of funds but the accessibility. Most of these enterprises are unable to access both short-term and long-term loans.

Some of the factors limiting funds accessibility by the SMEs include the lack of adequate collaterals and credit information, stringent conditions set by financial institutions, and the cost of accessing funds.

2. Lack of Infrastructural Facilities:

Lack of infrastructural facilities is a serious impediment to the performance of SMEs. The problem of infrastructure ranges from inadequate infrastructural facilities like electricity, good road network, availability of portable water and solid waste management.

In Nigeria for example, businesses have to provide expensive parallel infrastructures. Of these problems, the problem of electricity remains the most critical in Nigeria.

The epileptic power supply seriously hinders business growth and development in Nigeria. This makes many businesses to cease operation due to erratic power supply.

Consequently, most banks in Nigeria hide under this umbrella to blame their inability to fund SMEs on the poor state of infrastructure, economic climate and low performance of public utility.

3. Poor Management and Low Entrepreneurial Skill Base:

Lack of trained work force and low managerial/entrepreneurial skill base constitute a serious clog in the survival of SMEs. Inefficiency in overall business management and poor record keeping is the bane of most SMEs.

Technical problems/incompetence and lack of essential and required expertise in production, procurement, maintenance, marketing and finance have always led to funds misapplication, wrong and costly decision making.

4. Lack of Strategic Planning:

Regrettably, SMEs do not carry out proper strategic planning in their operation; however, sound planning is a necessary input to a sound decision making.

5. Poor Marketing:

Entrepreneurs often blame their failure on inadequate sales. However, the real problem lies with ignorance of the need for marketing skills and not just inadequate sales. Quite often small business owners appear to be overly optimistic about sales.

They don’t seem to know that the best of products still need stimulants to be able to move out of warehouses and out of retail stores. Many small businessmen in Nigeria see poor sales as an isolated problem rather than a poorly developed and poorly coordinated marketing effort or lack of it.

6. Unplanned Business Ownership:

Very often, entrepreneurs go into business without taking a realistic view of their strengths and weaknesses, let alone giving a careful consideration to the economic trends or business conditions in that particular sector of activity. They don’t analyze their administrative adequacy.

Business management is so much concerned with administration and administrative skills and managerial ability become more and more important as one moves on the administrative ladder. Many business owners in Nigeria rely on their skills and talents and engage in purchasing, pricing, advertising, budgeting, and performing personnel and other management functions.

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They apparently always neglect the need for experience and training; but as the business grows in size, they begin to realize the need for training in these areas. Unfortunately, such realization often comes late and the business is doomed.

7. Poor Personnel Management:

The root of most employee problems in is poor personnel management. Most proprietors are usually more concerned about production, sales and finance, to the detriment of personnel matters. They suspend personnel matters till crises set in. Such crises usually pose serious threats to the firm’s survival if they are not promptly looked into.

8. Deteriorating Macroeconomic Environment:

The harsh macroeconomic environment in Nigeria has adversely affected the performance of small business enterprises and hostile to their survival and growth. Majority of small business enterprises are grappling with the problem of uncertainty created by the macroeconomic instability and policy shifts.

Government fiscal indiscipline impacts negatively on private investment and survival of small business enterprises as large public sector deficits fuel inflation, price variability, and exchange rate volatility.

Solutions

From the foregoing, the following recommendations are therefore made:

1. There is the need for government to broaden the financial base of SMEs by helping to integrate the operations of the formal financial institutions with that of informal financial agents. The banks should rely on the informal agents for loan repayment by the SMEs since they have inbuilt control to ensure full repayment of loans when they become matured.
2. There is the need for government, Chambers of Commerce and nongovernmental organizations to create Seminars and workshops and other forum for interaction of SMEs owners/managers with others and thereby improving on their management capabilities.

3. Government should provide necessary infrastructures in order to encourage and promote rural industrialization.
4. SMEs operators should strive to develop their competences in managing and sustaining their businesses by constantly engaging in capacity building, training, research and development.
5. SMEs owners/managers should be encouraged to maintain adequate and proper financial records; which is a vital tool for good management and sound decision making.
6. SMEs operators should device effective marketing strategies such as creative personal selling, customer oriented product lines or services, adroit advertising and good business location; which all enhance smooth and profitable business operations.
7. SMEs owners/managers should develop good personnel management policy. The success of an enterprise greatly depends on the owner’s relationship with his employees. The hiring policy in SMEs should not be based on non-business considerations, such as friendship and family relations.
8. Planned business ownership:Entrepreneurs should only go into business after taking a realistic view of their strengths and weaknesses. They should analyze their administrative adequacy and avoid rushing into any business for the mere fact that there are no job opportunities for them; and that other people who are already in such businesses are succeeding.
9. Government should create a stable macroeconomic environment. Macroeconomic stability is desirable because it is characterized by low inflation, stable and investment friendly interest and exchange rates. It aids planning and enables businesses to make reasonable forecast on costs, turnover and returns on investment.

Final Thought

Nothing will make your small business 100% immune to economic problems, but implementing these can help ensure that your business survives tough times and possibly even profits from them. It all begins with analyzing how you’re doing things now and looking for ways to improve.