Small Business Advice 101:

Slash Your Overhead, Not Your Marketing Budget

Tough times call for tough measures. But when the economy goes south, people panic, fuelled by the endless gloom and doom message spread on the evening news. The problem is that many small businesses react by significantly reducing the amount of time and money they spend on marketing and advertising. But in most cases, this is the wrong kind of small business advice because they're actually cutting off the source of supply.

Marketing is the lifeblood of every business. Marketing makes you money. It's good small business economics to continue to market. Marketing is the key to attracting new prospects... converting them into customers... and getting those customers to buy more products and services - again and again.

Delighted customers are more likely to become raving fans who tell others all about your business and products. When you cut your marketing costs, it usually throws a monkey wrench into your revenue-generating system. When you look at your small business accounting, it appears that slashing costs is a good thing. But in reality, marketing is the one area of small business that you shouldn't reduce in tough times.

Sure, cutting costs is a necessary adjustment to challenging economic times. But there's nothing a struggling business needs more than cash and that cash comes from customers who are drawn to your business through your marketing. Stop marketing and you stop the flow.

Instead, think about other ways to cut costs. One expense that often goes undetected is inventory. Have you small business accounting person calculate those costs for you.

Any product that's sitting on the shelf is costing your business money. It only makes you money when it's turned over. A "just in time" delivery system is kind of small business advice that skyrockets your profit if you can figure out how to pull it off. You simply receive and redirect shipments promptly as those orders roll in. You'll need an efficient system to make it happen, but you avoid the cost of stored inventory.

The last thing you want is to be sitting on stock that costs money to acquire and warehouse. Be prepared to pay 5% more to suppliers to house inventory for you until you need it. But doing so helps preserve the most valuable asset when starting a business -- cash -- and that's small business economics that clearly make sense.