During this economic downturn, entrepreneurs might be reluctant to spend money to make acquisitions, expand capacity or open new markets. But this could be an ideal time to invest in your business.
"Every recession creates opportunities for innovative entrepreneurs," BDC executive Joy Playford says. "Inaction doesn't mean safety in uncertain times. Rather than simply hope that things will get better, you can act to improve your operations and position yourself for growth when the economy recovers."
Before investing, however, she recommends that business owners be vigilant about spending and take a close look at their balance sheets.
"Start by taking your company's short-term pulse and make sure your finances are in order. You need to know if you're simply in survival mode or if you have the extra capital to inject in your business," says Playford, regional director of special markets for the Prairies and Western Region at BDC.
"It's important to turn over every stone. For example, take out all of your lending agreements and see if there's room for negotiation and more repayment flexibility. Also, watch your credit terms with suppliers to make sure you're getting the full bang for your buck."
Entrepreneurs can also consider borrowing more capital from specialized organizations that take higher risks with small and medium-sized businesses, she says. "Be transparent with your lenders about your projects and build their confidence in your company and its future. If a bank can see the long-term potential for your business in buying new technology, you're more likely to get the loan."
Improving operational efficiency is one of the ways entrepreneurs can invest now and see a payoff down the road, according to Playford. "This is the time to eliminate waste in your company, which also frees up capital. Be sure your processes are lean and delivering what they should."
Overproduction, defective products and poorly trained employees are just a few of the possible sources of waste that business owners should look for.
Entrepreneurs should keep in mind that almost all businesses are affected by recessions, which therefore offer good opportunities to take advantage of cheaper prices from suppliers of equipment and technology that could help streamline production. "It just makes good business sense," Playford says. "The money you invest now could generate further profits later."
She also believes entrepreneurs can always benefit from investing in outside advice on ways to improve their operations. "When you're too close to your business, it may be hard to see areas where you can be more efficient. A consultant can help you identify your company's weaknesses and the means to overcome them."
Sizing up new markets
Exploring new markets is another area where investment might make sense during an economic downturn. "As competitors fold, this is the time to take market share. One of the first steps is to assess your market to see where the opportunities are. Don't go on hearsay. Get out there and do real research yourself," Playford says. "You should be looking for possible acquisitions, or potential alliances with other companies. These are excellent strategies to gain access to new markets."
Launching new products and services, or at least improving existing ones, can also pay off during a recession, she says. "Scrutinize your customers' changing needs. Make sure that your products or services are in tune with what they want. Keep your eye on your competitors and see where you can outshine them."
For Playford, getting employees more involved in this process is paramount during a recession. "Encourage your team to brainstorm and generate new ideas that could help you reach new clients. After all, your employees are on the frontline and have a lot of real insight into market needs," she says.
"Ultimately, during tough times, it's important to keep a positive outlook rather than focus on a bleak picture. It takes courage to invest in times of uncertainty, but if you do it wisely, you'll see positive results."
BDC Consulting has a national network of management consultants who are ready to meet your specific needs at any development stage of your business.
Call us at 1 877 BDC-BANX (232-2269) or let us contact you.
Content in this section is provided in partnership with the Business Development Bank of Canada. BDC provides entrepreneurs with financing, venture capital and consulting services. To find out more go to BDC.ca.