An interesting discussion this morning with a start-up CEO prompted me to pinpoint  a few guidelines I learned for small businesses to follow, especially in a struggling economy. Gathered from years of personal experience, as well as lessons relayed by fellow entrepreneurs, these simple tenets can  be helpful.

I started my agency, 5W Public Relations, in 2003.  Since then, it has grown to become one of the 25 largest independent PR agencies in the U.S., ending 2008 with nearly $12 million in revenue.  We have no debt, pay vendors on time, and have always had a profitable business, as we work very hard and deliver results.  We don’t accept complacency: we demand and deliver.  We have never had a line of credit, don’t carry credit card balances and pay our bills on time.

One of the hardest parts of running a business and being an entrepreneur is extending credit to companies and managing cash flow. To this day, in our seventh year of business, when I look at my accounts receivable and see seven figures outstanding, it’s terrifying. It’s one of the biggest differences for me between owning a business and having a job.
 
Anyone who owns a business has been stiffed. The question isn’t “if,” but “how much and how often.”  Additionally, as AdAge says, asking agencies to wait “as long as 120 days to be reimbursed” is “putting a painful burden on some shops.” There’s not much one can do other than understand that cash is king and good clients pay their bills.  In this economy many agencies will merge or fold, as they simply can’t afford to keep their doors open.  The small businesses that are having trouble managing cash flow (or lack thereof) will have no choice.

My small business guidelines to live and breathe by:

1. There are basic cardinal rules that seem simple but shouldn’t be violated, especially during these unique times: Don’t spend what you don’t have (cash is king, not credit). Sweat the small things.

2. Keep overhead as low as possible. If you currently have office space, now is the time to act quickly and look at options to renegotiate your current lease. If you are a new business looking for office space, there are many companies that are currently renting extra space.

3. Hire strategically, because the growth of any new start-up will be affected by new government policies, from matching employees Medicare tax rates to the added burden of paying extra commercial real estate taxes.

Food for thought.

Ronn Torossian

5WPR

This entry was posted on Wednesday, April 15th, 2009 at 10:55 am and is filed under ENTREPRENEUR. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.