Small Business Survival Guide: Surviving the Downturn - UH Bauer Entrepreneurship Director Gives 10 Tips for Business Owners

HOUSTON--(BUSINESS WIRE)--With Wall Street hitting record lows and one of the bleakest economic outlooks in decades, small business owners are preparing to weather hits from the trickle-down effect of a recession.

“What we did was we increased our marketing strategy”

What will make the difference between the businesses that survive and those that don’t? Is there a way to remain resilient in the midst of so much uncertainty?

Dan Steppe, director of the nation’s top-ranked entrepreneur program at the University of Houston’s C. T. Bauer College of Business, and Ron Wuensch, an instructor at the Cyvia and Melvyn Wolff Center for Entrepreneurship at Bauer, have decades of experience in guiding businesses through good times and bad. The two have been busy advising current students about how to weather the current financial upheaval, and recently sat down to compile 10 things small business owners can do to emerge from this down cycle unscathed:

1. Face facts — but don’t get drawn into what Steppe calls “the media melodrama.” The political maneuvering that prefaced the eventual signing of a $700 billion financial rescue bill threatens to detract from a more important reality, he says. “We got into this problem because we have too much debt and not enough collateral. These problems have not been solved. We are going to be or are already in a recession.”
2. Look for places to reduce debt and only invest in necessities. “Cut back on everything,” Steppe says. “Be cruel and heartless about what you need to be in business. Get rid of everything you don’t need. Know exactly why you borrow what you do.” Wuensch adds: “With a change in economics you have an opportunity to really look at your business, and adjust it to the next economic reality.”
3. Remember the basics of sound business. Never borrow money on a short-term loan if you aren’t really able to repay it until long-term. “Forget that you’re a financial genius,” Steppe says. “If you’re borrowing money, it needs to be paid back over the life of the asset you’re buying. Don’t take out a 12-month loan assuming you’ll be able to borrow at 5 percent or borrow at all when it comes due.”
4. Really get to know your customer. Rip out your answering machine, step up your service and ask what they need. Understand how your target customer has evolved. In general, “It’s best to target high-end or budget buyers, the middle is gone,” Steppe says. “Do something fast or you’re about to go out of business. People will be buying what they need and cutting back on their wishes and wants.”
5. Embrace the current economic reality, Part I. “The bottom of the cycle is a really good place to start a business,” says Wuensch, “because when you start off on an up cycle, your assumption is that this (level of profitability) is going to go on forever.” Those who have studied the history of business will be comforted by the knowledge that downturns always eventually go up.
6. Embrace the current economic reality, Part II. Competitors’ failed businesses present an opportunity. “If the fundamental need of their business didn’t go away, people who understand this can exploit it (often by buying the failed company or hiring top employees left without a job),” Steppe says.
7. Postpone a new business launch, and consider the intervening months or years a gift. “Those who have experience are better off. Go work for someone else for a few years, fill in the holes of your education and keep working on your business plan,” Steppe says.
8. Network and join together with other business owners. Vote, and act as a group to wield influence on local and national levels in order to create a better business environment.
9. Narrow your focus. Energy and technology-based businesses, for instance, are two fields that will continue to have needs even as the economy falters.
10. Remember that the most successful business people are highly adaptable. “That’s the heart and soul of being an entrepreneur,” Wuensch says. “Reading the environment and reacting to it is what an entrepreneur does.” He adds: “Figure out your position of strength, make good solid decisions based on your position of strength and the odds really are in your favor.

(Dan Steppe, Director of the Cyvia and Melvyn Wolff Center for Entrepreneurship, has started and managed five successful private corporations. Ron Wuensch, an instructor at the Wolff Center, also has extensive experience as an entrepreneur).

SIDEBAR:

Young Entrepreneurs Rethink Strategies In Wake of Market and Natural Storms

Danny Klam is one of the lucky ones, a student in the Cyvia and Melvyn Wolff Center for Entrepreneurship whose business — a growing chain of Simply Splendid donut shops — was up and running before the economy went south.

Some of his fellow students are putting their business plans on a backburner, he says, looking for jobs before trying to launch a business at a time when credit lines have dried up and consumer confidence is low.

“We had the lines of credit, so we’re fortunate and blessed for that,” he says.

Klam, 27, hopes that vendors will not begin raising prices that he would have to pass along to customers. His business niche is in reaching customers for breakfast, lunch and dinner with good food, at a low price, in a setting that offers “premium” extras like wireless internet and extended hours.

Another business owner student (both will graduate from UH Bauer’s Entrepreneur program in spring of 2008), Robert De Los Santos, 24, of Sky High Party Rentals, was forced to become innovative when Hurricane Ike hit Houston and reservations stopped. He believes the measures taken then will help his business remain resilient through whatever the economic downturn dishes out.

“What we did was we increased our marketing strategy,” De Los Santos says.

Specifically:

• His business, Sky High Party Rentals, took generator-powered inflatables out into the community for free, when doing business following the hurricane wasn’t an option. This extended goodwill into a community that was hurting and helped spread name recognition along the way.
• An employee renewed his focus on search engine optimization tactics. Now instead of being in the top 10, his business is in the top three or four, De Los Santos says.
• He and his staff created a video spoof of Hurricane Ike, posted it on YouTube, and got 25,000 hits, he says. The video featured the company logo.

• De Los Santos has decided to transition from backyard rentals to more lucrative reservations. He now targets communities with more disposable income and has increased the minimum rental, in order to gain churches, schools and other groups as clients. Sky High is taking fewer reservations now, but has increased profits in large part because of the savings on transportation costs.

The changes may have been spurred by a downturn in business, but — with the exception of having to let a few employees go — they have all been positive, De Los Santos says. “I think we’re a stronger company now.”

About the University of Houston

The University of Houston, Texas’ premier metropolitan research and teaching institution is home to more than 40 research centers and institutes and sponsors more than 300 partnerships with corporate, civic and governmental entities. UH, the most diverse research university in the country, stands at the forefront of education, research and service with more than 35,000 students.

About the C. T. Bauer College of Business

The C. T. Bauer College of Business has been in operation for more than 60 years at the University of Houston main campus. Through its five academic departments, the college offers a full-range of undergraduate, masters and doctoral degrees in business. The Bauer College is fully accredited by the AACSB International – the Association to Advance Collegiate Schools of Business. In August 2000, Houston business leader and philanthropist Charles T. (Ted) Bauer endowed the College of Business with a $40 million gift. In recognition of his generosity, the college was renamed the C. T. Bauer College of Business.