By Michelle van Schouwen
For many small businesses, these are good times. Customers are spending money, revenues are growing and the 2020 economic outlook appears healthy. Savvy business owners should know how best to leverage heady business conditions, because at some point all good booms must come to an end.
Predicting market cycles can be tricky for expert economists and small business owners alike. It is challenging to completely distinguish an economic bump (a rising tide that lifts all boats) from growth that is a sole and/or direct result of the business itself succeeding (the lone boat rising). What’s more, surprises, ranging from natural disasters to wars and beyond, can topple a boom without warning.
Only time will tell whether your business will continue to thrive even as others suffer declines during the next slump. Maybe you are simply doing better than your competitors. In the meantime, you can safely employ the fruits of the good times without creating unnecessary risk and without assuming your company will be immune to the next recession.
The key is to use your extra revenue wisely, which usually means focusing on smart one-time or short-term investments rather than committing to additional ongoing operating costs to your company or spending on frills.
-Leverage these good times to get more and better customers. Success can breed additional success. Quality customers may continue to spend even when the economy is so-so. Toward this goal, conduct a burst or one-time marketing promotion whose benefits will be longer-term. Upgrade your website, update your brand or employ other business-building activities for which you can pay in full while business income is strong.
-If you want to reward great employees, consider one-time spot bonuses, either in combination with modest pay increases or as a standalone. Too-sharp pay increases, even when issued to retain key employees, can become a serious drag on cash flow if business slows down later.
-Make one-time investments for needed capital improvements, equipment or supplies, or for tools that speed up your work and enhance your work product.
-Put money away for future cash flow or investment needs. Don’t feel the need to spend it now.
-Even so, if you have a lot of extra profit, consider giving yourself a spot bonus. What could be better than rewarding the person who has worked so hard for so long?
Enjoy the good times when you are fortunate enough to experience them. But play it smart. In a year or two or three, you’ll know if you have more than a general economic boom on your hands. And then, you can commit to additional growth plans. Either way, you’ll be grateful you haven’t weighed your small company down with higher-than-necessary operating expenses.
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Michelle van Schouwen enjoys an “Act 2” career as principal of Q5 Analytics, providing advocacy and communications for climate change mitigation and adaptation. See Q5analytics.org. For 32 years, Michelle was president of van Schouwen Associates, LLC (vSA), a B2B marketing company. In 2017, van Schouwen Associates was acquired by Six-Point Creative Works, Inc. of Springfield, MA. Michelle is available for speaking engagements on topics including her new work on climate crisis mitigation and Florida coastal water issues. She speaks to business and student groups about marketing launches and entrepreneurship and works with start-ups to support their development.
