Before he was tapped to run the Small Business Administration “out west,” Dan Hannaher spent 33 years as a small businessman in Fargo, N.D.
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Hannaher, 56, worked most of his life in the family business, Hannaher Office Environments.
Drawing on his own experience, and using a survey of those who do business with the SBA, he came up with a list of seven strategies designed to help small business owners survive a challenging holiday season.
While November-December sales traditionally account for 40% of annual retail sales, the National Retail Federation estimates that 84% of consumers will reduce their overall holiday spending this year.
Hannaher knows better than most that a successful 2009 holiday shopping season will determine whether many businesses, already struggling through a deep recession, will survive. The last 18 months have been especially difficult on locally-owned small firms because of falling consumer confidence and the reluctance of shoppers to make large purchases. But there are steps that small business owners can take today that can help change these dynamics and make the holiday season more profitable and successful:
No. 1. Monitor uncollected bills more closely.
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The holiday season brings vacations and distractions that can adversely affect a customer’s focus on paying their bills. Customers lax in paying invoices and bills are a drain on business cash flow.
Never let customers be late in paying their bills to your business. It creates a bad precedent. They may think you can wait while they use their cash to enjoy more lavish holidays; do your best to make sure that’s not the case.
No. 2. Reassess expenses.
Holiday survival requires keeping close track of performance and expenses, such as materials, labor and sales.
One of the biggest expenses is inventory; maintain strict control of it and your chances of surviving the holiday season increase dramatically. Your goal is to operate within a “smaller capital box,” and avoid having to refill it with outside resources like business loans or credit card debt.
No. 3. Involve your employees.
Your employees are critical to success and they’re probably scared to death about losing their jobs – if not this month, then next. Talk to them honestly as much as you can about holiday sales, and how the business is doing in general.
Staying silent is never a good option, no matter how appealing it may seem. If layoffs appear inevitable, how about reducing work hours across the board instead. If you’re straight with your workers, and they feel it, they may well volunteer to work a few extra hours to keep your doors open on Sunday or after hours during the holiday rush.
No. 4. Now is the time to reward loyal customers.
Do it with discounts. Consider offering a 10% or higher discount to local customers who have supported your business throughout the year. Can you really afford not to?
Display “extreme” customer service by treating all customers as if they are your most important. Impress this notion upon all your employees, even if it’s just for a few more weeks this year. Personalized, one-on-one customer service is the main reason many people shop at a small business and forego the big box stores.
No. 5. Hold an inventory blow-out sale BEFORE Christmas.
Dated inventory is a cash drain on any business, and one tried-and true marketing technique is to hold an after-Christmas inventory blow-out sale.
Huge discounts on old-or-outdated inventory always bring price-conscious consumers to your door. But this year is different enough – and trying enough – that you should try it before Christmas, perhaps on one of the key-weekend-sales days. Have fun with it. Send out bulk-mail postcards and e-mails announcing your one-day blow-out sale.
Also, announce these sales on social networks such as Facebook. Any youngster can show you how in 20 minutes at most. According to one business owner, this type of sale can generate a month’s worth of revenue in one day.
No. 6. Maximize your Web site to drive Internet sales.
Nearly 40% of all sales this holiday season will be made on the Web, experts say. Making a quick sale online has become simple and fast; make sure that’s the case on your site. Offer Web-only coupons and deals. Shopping mall crowds are such a hassle that buying online has become the norm for many holiday shoppers. Again, utilize social networking. Put up a Facebook page for your business and enlist “fans,” giving people a solid reason to join the “family.”
No. 7. Keep as much cash on hand as possible.
Cash on hand pays for those unplanned and unavoidable outlays of money, which always seem to crop up during your busiest time. You don’t want to be short of cash in a month that can produce 40% of your annual revenue.
We take calls every day from small-business owners needing last-minute business loans to cover unexpected inventory purchases and/or emergencies. Don’t be one of those businesses left with no options and no cash on hand. Increase cash reserves and reduce unnecessary cash outlays. Granted, this is a step that should have been instituted six months before the November/December holiday shopping season. But it’s never too late.
(Dan Hannaher is the SBA Region 8 administrator, based in Denver, Colorado, but also covering Montana, Wyoming, North Dakota, South Dakota, Utah.)