Five Tips to Avoid Layoffs During Tough Times

Compared to corporations, the nearly 30 million small businesses in the U.S. face unique life-or-death challenges during economic storms. They are less likely to have extra cash in the bank and often are forced to lay off highly trained personnel to stay afloat. But some successful entrepreneurs say there are alternatives to cutting staff in tough times.

No. 1: Ahead of the storm, save, save, save even when you’re able to spend, spend, spend: Larry Mocha, president of APSCO Inc., which makes pneumatic cylinders to power air systems in trucks and other vehicles, said small business owners should always plan for economic unrest – even in good times.

“You always know things are going to change,” Mocha said.

He advises that owners save as much cash as possible during good economic times to be available for potential bad times. His advice?

New is not always better: Make sure you absolutely need that new equipment before making big purchases. Don’t replace anything that works just to have the newest thing out there.

Cut unnecessary expense accounts: Your employees might not like this one, but cut out lavish expense accounts. Down the road it may mean being able to avoid cutting their job – and then they’ll thank you.

Do your homework on health-care plans: Even the smallest amount of savings can pay off over time. Study all of your options closely. Leave no quote unturned.

No. 2: Automate and find a few good interns: Assess your daily operations and see where automation can come in handy. If there is a task, such as answering the phone, that could be made more cost effective by getting a machine to do it - do it! This will save money and allow for the freed up employee to put his or her skills to more demanding work.

Thom Ruhe, director of entrepreneurship at The Ewing Marion Kauffman Foundation, says to also tap into local colleges for interns who can fill staff positions that otherwise would cost money and take away from more senior employees.

No. 3: Don’t cut the marketing budget: The next tip to avoid layoffs in a downturn is contrary to what most people think: spend money on marketing. Small business owners need to remain relevant in tough economic times and one major way is through strategic ad buys, be they online or in print.

“You have to spend money to make money,” says Jon Rutenberg of Computer Consultants in Washington. He says staying relevant as a business is important, especially when cash-strapped consumers get more cautious about spending.

No. 4: Customers are still kings: During tough times, it can pay to reach out directly to customers and make personal connections. Some ways to do this include creating a contest, online survey and/or even a request for info.

Let's say you're in waste management. You can send an e-mail to customers asking what types of problems they are having with recycling and trash services. You can also ask them about what they wish they had most, which can help with efficiently making inventory orders. These responses also increase brand awareness and generate loads of free company research.

No. 5: Hire wisely, fire less: Look for candidates with diverse backgrounds, this way you can be more certain there will be a place for them should job titles need to shift.

Find employees who share a passion about the business. It is important to have employees who care just as much as you. This energy will be necessary when a worker, in order to avoid being laid off, is told to alter how he or she does business.