AMES, Iowa -- Recession or not, there's one thing economists can agree on -- the country's current economic conditions aren't good. And while that's hitting everybody in their wallets, it's a matter of survival for some small business owners when consumers are reluctant to spend their money.
Howard Van Auken knows that some small businesses won't make it, particularly since recent U.S. Census Bureau data estimates that approximately 50 percent of small businesses (less than 500 employees) close within four years of launch. The Bob and Kay Smith Fellow in Entrepreneurship at Iowa State University, Van Auken says there are some steps small business owners can take to stay solvent.
The author of more than 50 academic papers on entrepreneurship and small business, he offers these small business survival strategies:
- Develop a cash budget to assess the worst case scenario.
- Use the cash budget to analyze contingencies.
- Work closely with lenders and suppliers to develop payment schedules if the business experiences financial problems.
- Exercise diligent control over inventory costs.
- Closely track accounts payable so that collections don't fall behind.
- Avoid ordering unneeded expensive merchandise and/or equipment.
- Avoid expensive credit cards for short term financial solutions.
- Eliminate all unnecessary expenditures.
- Remember to continue focusing on providing outstanding service to customers.
- Don't give up; the economy will rebound.
Van Auken has been teaching entrepreneurship in ISU's College of Business since 1995 and is the previous owner of a small business in Ames. The chair of Iowa State's Entrepreneurship Faculty Leaders committee, Van Auken was a presenter earlier this year at the United States Association for Small Businesses and Entrepreneurship annual meeting in San Antonio -- the largest annual entrepreneurship and small business conference in the world -- on ISU's campus-wide entrepreneurship initiative.