And unfortunately, some are facing a profit death spiral that brings everything into question -- and throws all traditional business planning into the wastebasket.



Many business owners keep their business operating at levels beyond what's called for by circumstances -- often for extended periods of time while they are understaffed and overextended -- by going into debt and hoping that the profitable business they've experienced in the past will come back to them (sometimes it will... but, this time might not be one of them).

After a certain point, that's not possible -- and a drastic cut in expenses is the only option. And, if you have to cut to the point where you lose key people who handle essential functions of your business -- then you're faced with a business that isn't possible to be run at the same level -- or that can't produce the profits you were getting previously.

This is a classic example of where strategy... rather than tactics... can possibly be the best solution. You simply can no longer continue doing the things you used to do -- since they are one of the reasons you're in the mess you're in now. It's time to completely re-assess and re-evaluate everything you do -- and be very clear about where your profits are coming from.

Profits are what's important... profits are what pays you... profits are the reason for having a business. Because, without ample profits to comfortably cover your costs each month (not cashflow or gross receipts) -- with room to spare -- your only option at some point will be to shut down your operations.

Hopefully things aren't that dire for you... and never will be... and you can use these suggestions while your business is comfortably in the black -- to re-examine your business and further improve your prospects. But, if you're experiencing a profit crunch... knowing the answers to the following six questions are critically important to your business's future.

Start by getting Very Clear

Take out paper and pen to write down your answers... while you ask yourself the following six essential small business recession survival questions:

1) "What are my most profitable business activities right now -- that are likely to remain consistent and keep producing in the current environment?"

(Consider if, in the best case scenario... doing only the most profitable business... will that be enough to support you?)

2) "Do these activities produce enough profit to warrant a business to support them?"

(This is important... just because you've been in a business or you want to be in a business... is not enough of a reason for the business to exist.)

3) "What activities are least profitable -- that I can no longer afford to do?"

(Don't delude yourself. If an activity produces below average returns on your investment of time, money, energy, or resources -- dump it. Don't wait.)

4) "What are my EXACT costs each month -- and what can I do without?"

(You must know to the penny... no kidding. How can you possibly know what you're aiming for unless you have your exact monthly target in mind. No guessing allowed.)

5) "How can I sub-contract and hand off all work that doesn't directly produce a profit"

(You must overcome the loss of your help by not consuming your time with administrative tasks such as doing paperwork, sales tax, accounts receivable, accounts payable, etc. -- that can easily be done by other professionals and specialists "as needed.") ... And,

6) "How can I leverage my tangible and intangible assets to profit in different ways?"

(Here's where you can start to get creative -- and harness your business in ways you might not have considered before. We'll go into this a bit more, below.)

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One Profitable Business Alternative

First, a couple of observations about profitable businesses:

Sometimes what seems like good business because it causes larger amounts of revenue, really turns out to be a lot of trading dollars once you take a closer look at it. If your employees were putting out work for you at low margins... then anything less than ideal circumstances for your business will cause a strain.

Whether you have employees now or not, you should constantly be looking for ways to upgrade the work you do to be more profitable business -- preferably ahead of any slowdowns.

Also, your ability to make a profit in your field is often unrelated to you actually doing the work yourself or in-house.

Let me explain...

Often the best resource you have... the main thing that really produces the most profits for you... is your ability to attract, sell, keep, and re-sell your customers/clients.

The real profit-generating assets of your business consist of your customer list, the brand you've built, the reputation you have in the marketplace, the contacts you have in your field, and your ability to conduct business and sell. None of this has anything to do with actually doing the work in your business that turns out the goods or services.

If you have people who are buying from you -- and who you expect to continue as customers -- what's to stop you from sub-contracting out the work related to the manufacturing... and setting yourself up as a broker for the deals with your customers?

You may even be able to have a friendly competitor take over your "physical assets" (or otherwise liquidate your support of those operations) -- while you maintain and keep your ability to conduct business with your clientele.

You have the knowledge about your business... you have the relationships with your customers/clients. Give some deep thought to how you can continue to transact business without supporting the facilities and operations connected with your business -- and you may be able to discover something that will work better to produce profits than you might now imagine.

Copyright 2009, Guerrilla Profits International