It’s undeniable: Gas prices are skyrocketing, homeowners are defaulting on mortgages and middle-class taxes are rising. What can Americans—and, specifically, dance studio owners, do to tighten their purse strings?
It’s time to pay closer attention to how you’re spending your money. We turned to the experts for their best advice on making smart financial moves.
Take Action Early
Stay keenly aware of your financial situation—and plan, plan, plan. “The biggest mistake business owners make in tough times is assuming things will get better faster than they do,” says Jim Muehlhausen, author of The 51 Fatal Business Errors and How to Avoid Them. A well thought–out strategy takes time to devise, so make a conscious effort to watch for economic changes and begin planning right away.
Start by taking a closer look at where your money is going. Make a long list of expenses—from employee salaries and office supplies to heating bills and marketing costs. “Whether in a recession or not, all businesses, notwithstanding size, need to be mindful of expenditures,” says Shawn Shewchuk, a Canadian-based consultant who works primarily with small and medium-size businesses. “It may at times seem like micro-management,” he adds, “but not taking steps to become aware of your financial situation can be disastrous. Never be reactive, as it may be too late.”
First of all, panic and stress won’t change anything (and can compromise your health!), so remember to maintain a clear head. Sudden moves, like slashing or raising prices, can hurt your business considerably. “Calculate the risks involved when implementing a new strategy,” advises Boston-based financial advisor Derek Brown. “The last thing you want to do is alienate your core clientele with an onslaught of new concepts that convey a ‘last-ditch effort to survive’ message.”
Michael Hart, a consultant and speaker on no- and low-cost marketing strategies, adds that some fluctuations are natural, and that business owners should try not to overreact. “It’s terribly important to gauge your response to recession concerns based on your studio’s performance, not on predictions of the future economic performance nationwide,” Hart says.
Trim Unnecessary Expenses
Go line by line and determine what and where you can cut, or where you can hold off. Are there ways you can delay discretionary spending? If it won’t hurt the business to put it off, consider waiting.
Shewchuk advises studio owners to shop around for cheaper options. He cites the example of a small company that saved $250 per month simply by sourcing a new office supplier. “Initially, the savings appeared small, but this translated into an additional $3,000 per year,” he explains. “Belt tightening is an absolute requirement for small businesses to maintain profitability when there is a slowdown in the economy.” Also, consider turning to your tax advisor to ensure you’re not missing any important deductions, like business interest expenses, adds Brown.
Focus on Winning New Business
While defense is important, consider boosting your offense. “It’s very common when the economy is sluggish to see business owners slash costs,” says Hart, “and many choose to slash their advertising or marketing budgets first. This is a critical mistake and may accelerate cash-flow problems.”
Instead, he notes, studio owners should increase marketing to bring in more dancers during slow periods. The secret is to look for free or inexpensive ways to advertise. “A story on a business in a local newspaper carries up to seven times the commercial value of a similar size advertisement, and it’s free,” says Hart. “Publicity is remarkably powerful. The commercial value is almost priceless.” And don’t forget the power of word of mouth: Just by talking to your current students, you can urge them to tell friends what a great experience they have at your studio.
Offer Smart Discounts
Coupon-type advertising, or “advertising that directly brings in business as a result of that expense,” also makes sense during a tough economy, says Muehlhausen. Try two-for-one specials or refer-a-friend days in the slow summer months, and don’t be shy about your efforts. “Keep in mind that people are hanging onto their money tightly, so a lousy 10 percent discount isn’t likely to motivate someone to action,” he adds, noting that it’s often better to offer something too generous than not generous enough.
Put the Web to Work
Tiffany Wright, author of Solving the Capital Equation: Financing Solutions for Small Businesses, says the internet can help people more than they think. There are web-based companies that specialize in helping owners save money by conducting office-related tasks virtually. “We can handle all the administrative tasks for a company, no matter where the business is located,” says Dida Clifton, the founder of TheOfficeSquad.com. These companies may also act as consultants, pinpointing any oversights or inefficiencies in your business plan and helping you to resolve them.
Make Some New Friends
“To save cash, consider bartering,” suggests Wright. If you haven’t already, partner up with local dance stores and make fighting the bad times a team effort. A storeowner, for instance, may post your class schedule in the shop or on her website in exchange for placing large recital orders or referring students to her business.
Be sure to nurture those new friendships. “Put an emphasis on forging close relationships,” says Brown. “The key to long-term success comes from the goodwill of strong relationships developed through the years.”
Ask for Help
By being honest about your money struggles, you can devise a reasonable payment plan with lenders or bill collectors and take a load off your mind. “Due to the high price of fuel, many gas and electric utilities are offering credits to those who contact them to place regulators on their air-conditioning systems,” says Wright. “The credit will reduce your bill immediately, and the regulator will reduce the energy you use.”
Get a Good Coach
Don’t weather tough times without support. “I’m a strong advocate for all small business owners joining and attending organized business clubs and associations in their communities,” says Hart. “Organizations such as OSBO (Organization Supporting Business Owners) have staff consultants who work with individual business owners on a variety of issues. Those who join have a variety of experts to tap into if indeed there was a local market downturn.”
Use the Downtime Wisely
Most economists say not to expect any significant pickup until late 2009, warns Muehlhausen, but it’s still important to ready yourself for better times. Use any downtime you have to reenergize and plan a business strategy for the upturn—things always get better. DT
Debbie Strong is a writer and dancer. She teaches dance and Pilates at All the Buzz in Queens, NY.