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Wednesday, January 21, 2009

Timely Tips For Recession-Racked Entrepreneurs

Forbes.com

Maureen Farrell, 01.20.09, 07:00 PM EST

Stop moaning--it's time for action.

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In Pictures: 10 Tips For Recession-Racked Businesses

How gloomy are entrepreneurs? ...

Few think the pain will subside anytime soon. There comes a point, though, when it's time to stop worrying and get down to the business of, well, staying in business.

While every small company has its own specific challenges, there are plenty that span all industries. ...

How can I plan when I can't project?

... Short answer to this problem: Face the uncomfortable fact that not all customers are created equal, says Doug Tatum, founder of his eponymous consulting firm and author of No Man's Land: What to Do When Your Company is Too Big to Be Small But Too Small to Be Big. Focus hard on profitable customers, even if that means restructuring your business a bit. ...

Should you chase lower-margin business just to keep the doors open?

Demand for laser-eye surgery has plummeted 30% in six months, says Dr. Michael Furlong, owner of a San Jose, Calif., ophthalmology practice. That slump really hurts, considering those $5,000 elective procedures traditionally pull in 90% of revenues. Doing more cataract surgeries would keep the lights on, but those operations carry significantly lower margins.

Do them anyway, says James Nolen, professor of finance at the University of Texas at Austin. Meanwhile, don't lower prices for laser surgery--that may tarnish the practice's reputation--but do offer incentives and friendlier financing, such as monthly installment payments. ... Worse case, sell some of the non-performing loans to a medical receivables shop at a discount to keep cash flowing.

How can I get my customers to pay me?

... To fend off problems before they start, try drafting contracts that tack on interest for debts 30 days past due, says Nolen. ... "When you're aggressive, you move up on the priority list of who gets paid," adds Nolen. "They might pay you just to get you out of their hair." (For more, check out "How To Collect From Deadbeats" and "Is Your Customer A Deadbeat?.")

If I have to cut staff, how do I do it?

... If you need to shrink salaries, try to shrink them across the board--that includes yours. Four-day work weeks may stave off job cuts (for more, see "Is A Four-Day Work Week Good For Business?"), as might renegotiating your lease.

If you must let people go, slice with a scalpel. ... Instead, figure out where you have excess capacity, and even what functions you can outsource to shrink overhead. (For more on making strategic cuts, check out "How To Slim The Ranks.")

How do I raise money and run my business at the same time?

... The lesson here: Raise as much money as you can, when you can. ... If you must, syncing up with strategic partners who can speed up product development and lend credibility with other investors.

"Entrepreneurs often don't want to raise more money than they need early on because it's dilutive," says Philippe Sommer, director of entrepreneurship programs at the Batten Institute within the University of Virginia's Darden School of Business. "But do you want to own 10% of a really big company or 70% of a company that might never see the light of day?"

In Pictures: 10 Tips For Recession-Racked Businesses

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