FINANCE: 2011: A Business Look Back

Column by Patricia Kummer, CFP


The economy and many businesses just completed another year of nothingness. Business owners are dealing with holding another year together with no economic growth, little or no increase in revenue, tight margins and restless employees.

I think we can understand that with the recovery in limbo and Europe in recession, that robust growth is not in the cards. I think we can adjust inventories and expenses as best we can and still keep the business running and workers employed, but this stagnant state of affairs is getting old.

We operate our businesses in the United States of America, the land of opportunity. We expect reward for hard work and growth after several years of investment. We are capitalists, we like to see improvement for the long hours and hard work and juggling finances, but this was not to be had for the majority of small businesses in 2011. So what can business owners do to help compensate for things out of our control? I believe it boils down to three simple things: Your finances, clients and employees.

Finances can mean everything from business loans and lines of credit, to employee and vendor contracts. Therefore, this is the piece that can never go on autopilot. Constant inventory control and review of bank and investment statements is a must when margins are thin. It is a constant juggling act to know how much to keep in reserve not earning anything, and how much to invest where volatility can erode the principal. One suggestion here is to look outside the bank with virtually zero interest rates and check out short- and intermediate-term bond funds including municipals. The year-to-date return just on the aggregate bond market was more than 7 percent last year. That certainly beats the alternative to many interest-bearing investments. Be careful, though, for bond returns can certainly fluctuate, especially when there is a threat of rising interest rates.

Clients can be demanding and good customer service is expensive, but they can also be considerate if they know what the situation is. When you go to offer a new product or switch communication more to the Internet, be sure and keep clients informed and answer any questions up front. Be pro-active and over-communicate if necessary. With today's technology, it should be easy to offer information in a variety of different ways to suit each client's preference. It may pay off to invest some time and better understand how your clients want to work with you and make those adjustments while things are slow.

Employees in addition to your clients are the backbone of your business. They are seeing neighbors and friends lose their jobs, benefits, take pay cuts or demotions and the emotions are running high. Communication is again the key here as well as with your clients. Let your staff know what the state-of-affairs is and ask for suggestions to move forward in a positive way. No one wants to fear for their job but at the same time, it is important to keep employees focused on the job and not worried about their future. It is no secret that hard times cause us to evaluate everything, including any fluff in the work force. Give your employees a chance to step-up to the plate and communicate their goals and ideas. This helps them have a little control over their situation and allows them to be more knowledgeable about the business. If you are able to keep your employees without reducing wages or benefits, then you are in a good situation for the future. Let them know what to expect when growth is back on track and how they can participate.



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