The economic recession is affecting everybody, and many businesses are finding it very difficult to survive. Being flexible is critical; however learning to be flexible can be difficult. Inc Magazine’s Leigh Buchanan explains that “a bad economy takes its worst toll on the very young (start-ups) and the old and unhealthy (large corporations that over years or decades have grown inefficient and unwieldy)”. This is due to the fact that most start-ups simply do not have the money or resources to be flexible, and large corporations are either set in their ways or have painted themselves into a developmental corner that, when faced with the need to be flexible, they cannot escape. However if a company can overcome the challenges of the changing economy and change with it, that company will come out on top in the end and be all the more successful. “There are advantages to having started in years of technology-bust and terrorist-attack turmoil…such businesses are flexible and innovative, and that’s why they’ll do so well,” Buchanan adds.

In order to be flexible enough to survive, many tough decisions must be made regarding budgeting, staffing, policy changes, location changes, and more. Many people argue different tactics on flexibility, but small businesses run differently than large corporations and what may be good for one company won’t necessarily work for another. There are, however, some good points to be made that are tried and true for most business organizations.

Budgeting. It takes money to make money. This is a widely known fact in the business world. But when your money supply is running low, how do you keep your head above water? Little pockets of money can be found all over the office: in little things such as buying generic brands vs. name brands, cutting down on energy and costly resources (see previous article Going, going…green! for more tips on how to cut down on basic spend), downsizing your staff, cutting executive bonuses, and traveling less. Many internet-based start-ups tend to throw money around by opening glamorous and trendy offices, buying company cars, spending too much on ineffective advertising, etc. Keeping a stronghold on your finances is crucial; so use the tried and true motto “if you don’t need it, then don’t spend the money on it.”

Staffing. Downsizing is a scary thing for employees and business owners, and layoffs are never a popular subject. However in these tough times, you need to do what is right for the survival of your business. So how do you approach downsizing intelligently? It’s easy for business owners to assume that by cutting higher paid employees they will save more money, but this is a very poor strategy. It’s best to look at your staff and measure which employees are the most productive and loyal (even if they’re being paid more), and cut the employees who are inefficient and who aren’t producing. Essentially, get the most bang for your buck. An efficient staff will get you through the hard times and be that much more loyal to your company when times are good. Also, try to recognize which positions in your company aren’t crucial to your company’s success. For example, if you can do your own bookkeeping and delegate other staff members to answer phones, then cut your bookkeeper and admin assistant or office manager. It goes back to that same rule: “if you don’t need it, then don’t spend the money on it.”  If you find yourself in need of general employees (office manager, admin assistant, HR) but cannot afford to keep them on staff, then look into an employee share program with another office. Many offices share a single employee and each schedule the employee part time. That employee gets a full time salary, and both companies get the work done for a low price.

Policy Changes. If you haven’t sat down and reviewed your company’s handbook and business model by now, then you’re behind. The minute you notice that an economic recession is in sight, then it’s a good idea to take a fine-tooth comb to your company and find policies that will slow your company down. Many examples include your middle managers’ expense accounts, commission tables, budgets, etc. When times are good, you can afford to splurge here and there, but when times are bad you need to stop all of the little things from adding up before they start.

Location Changes. Do you have a flashy downtown office? Do you need a flashy downtown office? If the answer is no, then you should start looking at moving to a cheaper building. If you lease your office, then you’re in a good position because you have the ability to move as needed. As mentioned before, many companies feel the need to splurge on a big, flashy, trendy office. Yet unless you have clients visiting often, then you don’t need all of that. If your company is solely internet based and no client ever sees your workspace, then you could work out of a basement for all they care. Again, I cannot express this enough, “if you don’t need it, then don’t spend the money on it!”

Trimming the fat during an economic recession can help you keep your head above water, but it can also make you faster and more productive when times are good. Continue these practices when the recession is over and keep that saved capital in your bank account where it belongs. Learning to cope with economic instability is tough, but if you can get through this tough time you will have gained much knowledge and a competitive edge for the future.