NEW YORK (AP) — Many small business owners decide to expand their companies even as they see the economy starting to slow, but some are proceeding with caution. Here are tips from owners and consultants about how to expand in a downturn:
— Keep a lot of cash in the bank. “Before you start taking risks, make sure you have a comfortable amount of reserves,” says Gene Marks, owner of The Marks Group, a small business consulting firm in Bala Cynwyd, Pennsylvania. Even companies that aren’t expanding need extra cash in the event of a downturn. And if you do expand, don’t go too heavily into your reserves to fund it.
— Be selective about who you work for. Screening customer and client prospects to improve your chances of having those who pay on time and won’t flee when the economy weakens can help keep cash flow healthy. Monica Guzman Escobar, owner of Los Angeles-based public relations firm Startr Co., interviews her prospects to be sure they’re serious, well-funded and well-managed.
“You can never be 100% certain of this, but by doing our homework in advance, we hope to work with clients who are also being strategic and smart about the future so that we do not grow our business around instability,” Escobar says.
— Expand in a way that will make your business more recession-resistant. Jacob Landis-Eigsti, owner of Jacob LE Video Production in Lakewood, Colorado, wants to bring in more revenue, but he’s focusing more on consulting rather than video production. Consulting pays more, and clients are more likely to need that kind of service rather than video production in a downturn.
— Don’t be cautious to the point where you unnecessarily inhibit your growth. Owners may be conservative about expanding their payrolls, not wanting to take on more expense or risk. But Marks advises, “never walk away from a really good strategic hire. Find a way to make it work.”