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A bleak economy? 7 ways to deal

Don't tell Amy Jones Yetter and Michael Yetter that small businesses can't survive the recession.

Whether cutting expenses or postponing new inventory purchases, the co-owners of Bugs and Blossoms --a West Chester, Pa. online boutique-- have moved aggressively to counter a slowdown in business.

"We've really felt the effects of the economic slowdown," says Amy. "We've employed a number of strategies to cope."

It's undeniable that times are tough, for consumers as well as small businesses. It seems everyone is staggering under rising unemployment rates, falling home prices and dwindling consumer activity, particularly with regard to discretionary spending.

Difficult? Definitely. Hopeless? Hardly. There are strategies small businesses can use to weather an economic storm and, in fact, continue to grow. Here are seven that can help.

1. Cut back judiciously. In the face of jittery economics, it's always wise to streamline whatever costs and expenses can't be fully justified. "We reduced and refined advertising expenditures, shifting budget away from expensive national Internet advertising campaigns to focus on less expensive local grassroots efforts," says Amy Yetter. "We are stretching our existing stocks and postponing new orders with the exception of necessary or very popular items."

2. Identify fresh revenue sources. Cutting back in some areas shouldn't be a wholesale policy. Look to counterbalance cutbacks with expansion into other promising areas. In the case of Bugs and Blossoms, that's meant boosting revenue by outsourcing order fulfillment and other functions. "Small businesses have an advantage in that they are flexible and can make decisions quickly," says Toronto management consultant Andrew Miller. "Leveraging off of existing strengths usually presents excellent opportunities for revenue growth at a high margin."

3. Promote expertise in other ways. If your business truly excels in some manner, don't be shy about letting others know about it. Consider an aggressive program of sharing your expertise, be it through speaking, publishing articles and other visible means of letting potential clients and customers appreciate your know how. "You never know who might see you speak or read your article and be interested in your services or products," says Miller. "And, these are all ways of marketing for free."

4. Identify markets for new prospects. Would-be customers and clients are still out there -- you just need to target prospects for new business. That's precisely what Media Conversion and Protection, a multi-location home video to DVD conversion business, did by focusing on demographics that worked with their products.

"We're looking at past clients for additional work as well as positioning ourselves in affluent markets to move our business away from people who will see video conversion as an unnecessary luxury," says president Mark Bollman.

5. Examine where customers are coming from (and where they aren't). In a booming economy, bang for the buck isn't necessarily a make or break formula -- in down times it's essential. Using products such as Microsoft Business Contact Manager or Dynamics CRM give you a clear picture of what products, marketing and other elements are resonating with customers and which ones are fizzling. "You must take a hard look at the customer attraction and conversion strategies and understand what is working and what isn't," says Poughkeepsie, N.Y. business coach Skip Weisman. "If you haven't been tracking and measuring each source, then you're losing money and opportunities."

6. Emphasize referrals. Nothing is more powerful or provides a stamp of approval than a referral from an existing client or customer. Solicit them from your current lineup. To help, offer them perks or promotions.

"Every day I send e-mails or call clients, past clients and prospects and offer them free gifts for referrals," says Robert Smith of Champion Media Worldwide, a Chicago public relations and consulting concern.

7. Whatever you do, move away from a survival mindset. Dealing with obstacles means changing your frame of reference from getting by to exploiting opportunities that others may not notice. Diamonds in the rough are impossible to find if you assume that finding them is impossible.

"You shouldn't be looking to just survive a recession but looking for opportunities to take market share away from your competition as your competition looks to just survive," says Weisman. "Shift your mindset from being in a down economy with no opportunities to one that is ripe with opportunities."

For more tips on running a small business, see Business on Main.