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BDC Perspective: Surviving in trying times Add to ...

Running a company is rarely easy; managing one during difficult economic times is all the more challenging. Edmée Métivier, BDC's executive vice president for financing and consulting, has some sound advice on keeping your company healthy and afloat at a time when the business world is awash in red ink and some of the most trusted financial institutions in the world have been strongly shaken.

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Canada's economy is more resilient than many around the world, and should recover more quickly. Nevertheless, the slowdown in U.S. consumer and business spending has had an impact on many Canadian snall and medium enterprises (SMEs) -- especially those that depend on revenues from exports to the United States.

Financing is available

The credit crunch has also taken its toll. Almost any entrepreneur will tell you that access to financing is the biggest challenge to growing a company. Clearly, access to financing is more difficult now than it was a few years ago. While Canada's private sector banks have not stopped lending to smaller businesses, they have adopted a more cautious approach. At the same time, U.S. lenders in the Canadian market have slowed down their activities considerably, resulting in a significant reduction in the financing available to Canadian businesses.

Fortunately, alternative sources of financing are available. In times like these, it is not unusual for financial institutions from the public and private sectors to work in partnership to offer financing to entrepreneurs. While not a replacement for private sector banking, public institutions such as the Business Development Bank of Canada are well positioned to offer stability and support during economic downturns. As a crown corporation, it has no difficulty in obtaining funds to offer financing to business owners.

What you can control

In an environment of uncertainty, there are many things entrepreneurs cannot control, such as inflation, consumer and business spending or the value of the dollar. Rather than worry about things they can't change, entrepreneurs should focus on the things that are within their ability to manage. What are they?

Keep taking a long-term view. This can be difficult when the news in the business section is overwhelmingly negative, but Canada's smaller businesses need to innovate, improve productivity and export to new markets to be competitive in a global economy. Canada's entrepreneurs must continue to plan and prepare for development opportunities.

Free up working capital through aggressive cost reduction. During an economic slowdown, managing working capital is crucial and requires the constant attention of business leaders. Rigorous cost management involving improved business processes, including the elimination of services purchases and other expenses that do not add significant value to the operation, are simple ways to free up working capital. It is important, of course, to analyze where value lies before the cutting begins. On the revenue side, additional sources of working capital may include government subsidies, grants and tax credits that apply to particular businesses.

Work on the organization. When an enterprise is busy and overstretched, its management team often does not have time to focus on efficiency. A slowdown may be the ideal time to think about the effectiveness of a healthy work organization. Should you proceed with a reorganization? What ideas do employees have about working processes? Could you benefit from the perspective of an outside consultant?

Cement relationships with customers and suppliers. When projects slow down, the time is right to look more closely at your day-to-day business. Meeting customers face to face is always a good idea. It helps solidify relationships and provide firsthand insights into customer service needs. This may also be a logical time to evaluate suppliers.

Look for ways to innovate and improve productivity. Many productivity gains are possible through information technology, logistics, process improvement and other related concepts. When asked, employees can often suggest ways to do their work better and faster. Focusing on innovation can lead to the development of new or improved products and services.

SMEs must take advantage of the situation

By concentrating on the things they control, Canada's SMEs can set the stage for an economic rebound. Numerous recent surveys have found that, in spite of increasing worries related to access to financing and the economic slowdown, the majority of entrepreneurs are optimistic about the long-term outlook. An Ipsos Reid survey concluded that more than half are cutting back on unnecessary expenses, almost half are working to provide extra value to customers and others are finding ways to reduce energy and fuel consumption and increase marketing efforts.

Adverse economic conditions can make business more challenging than ever. But by taking measures to survive the economic downturn and stay strong, SMEs can position themselves to take advantage of opportunities, become more competitive and ensure their long-term success.

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.

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