First of all remember that you are in business for the long-term.  Economies have always been cyclical, a series of expansions and contractions caused by short-term influences.  Your role as an entrepreneur is to focus on the future and take actions that will build both profit and equity over time. 

It is easier to feel confident in your sales projections and investment decisions when the economic trend is steady and there is consensus among forecasters about the direction the economy is heading in.  When there is uncertainty about the immediate future, you need to adopt some strategies that will give you the maximum flexibility to respond when the situation steadies out, forecasters come to a consensus, and economic volatility decreases.  Here are a number of actions to consider:

• Don’t stop or cut advertising as a way of cutting expenses.  It continues to amaze me how many businesses do this when sales slow, and then wonder why they continue to drop.  Instead, make sure that your advertising is effective by using coupons, “special offers,” and asking new customers how they heard about your business.  As changes in the economy affect your target customers, you may need to change your advertising content or media mix to find new ones.  If for example, your business previously targeted construction workers as customers, you may need to refocus on medical industry workers, seniors, and teachers who have been less affected by the economic downturn.  In order to do that you will need to modify your message and may need to change your media mix.
  
  
• Don’t overstock inventory just because “the price is good.”  Many suppliers are responding to the downturn by offering savings for larger orders.  While that might lead to higher profits in the long run it can hurt your cash flow if your money is tied up in inventory that is not selling when you have other expenses to pay.  What you should be doing, in good times and bad, is to watch your inventory turnover.  There are standards for most types of businesses as well as specific data from your business in your financial reports.  If the norm is to turn over inventory four times a year, do not purchase more than you can sell in  a quarter.
  
  
• Take advantage of falling interest rates by refinancing any long-term debt the business has.  If you have lines of credit, or are using credit cards to finance business operations, move debt to the issuer with the lowest rates.
  
  
• If you are overstaffed based on current sales levels, try to reduce overall hours, not staff.  If you layoff employees they will not wait for business to pick up again, and when it does, you may not be able to respond to increased sales opportunities due to a lack of skilled staff.  If possible, cut hours instead, going to a 4 day 32 hour week instead of remaining at 40 hours and laying off one or more employees.  You can still remain open for customers five or more days by having some staff work Monday to Thursday, and other staff working Wednesday to Saturday. 
  
  
• Look for supplemental products and services you can offer to your existing customers.  Examples are: office cleaning > add duct cleaning or window washing; lawn services > add pressure cleaning or landscaping; clothing store > add accessories; wine shop > add party planning service.  You will need to determine what other products and services your customers use and want.  A good way to do this is by asking, either as they come in, or via a survey or questionnaire.
  
  
• Make it easy for customers to pay for your product or service.  Accept all credit cards, even those that charge an extra discount percentage.  Giving up ¼ or ½ of a percent extra on the sale is still going to be profitable, especially if the sale is one you wouldn’t have gotten without accepting that particular card.  If you are doing sales on the Internet and don’t accept PayPal, sign up to do so for the same reason.  If you sell large dollar items (lawn tractors, furniture, appliances, etc.) start a lay-away program to “lock-in” the sale.
  
  
• Make sure that company vehicles are being used efficiently.  Track daily mileage and make sure that routes are planned to eliminate excess driving.  Track vehicle miles per gallon and get “tune-ups” on those vehicles where mpg is falling or is below fleet average.  If your service fleet makes many calls a day, consider having a “no-idle” policy and installing hour-meters (about $75 per vehicle) that record when the engine is running.  I have noticed in my neighborhood that several pest control services and lawn services have the trucks idling while on the job site just to keep the a/c on and the cab cool.  Engines are at their most inefficient state while idling and this practice can waste a lot of fuel (as well as adding needless pollution).
  
  
• Review how much money you spend on postage and consider paying your bills electronically where possible as well as e-mailing invoices to your customers.  If you reduced postage by 100 pieces a month, $41 does not sound like a great savings but think of it as covering several hours of an employee for free.  If you do large mailings of catalogs or other pieces, check with the post office to ensure that you are using the most efficient pre-sorted or bulk rate available.
  
  
• Energy savings can be achieved by replacing all incandescent bulbs in your business with compact florescent (CFL) ones.  Even spot and flood type bulbs are available in CFL.  CFL’s will use about ¼ of the energy to produce the same amount of light while lasting years instead of months.  If you have over 5,000 square feet of space with overhead florescent tubes, check with an electrician about new tube fixtures that are available.  They are much more efficient than the original fixtures and may pay for themselves out of savings.  Installing an automated thermostat will ensure that temperatures are set back when you are closed and they you are not heating or cooling the space when it is not needed simply because an employee forgot to reset the thermostat.
  
  

When the economy starts to turn upwards and grow again, as it no doubt will, there are two actions you can take that will protect your business as well.  They are:

• Respond to staffing needs increases first by returning to a 40 hour week if you had to cut back earlier.  Then use overtime and temporary staffing services to meet needs until you are certain that the upwards trend in sales is steady.
  
  
• Respond to production needs increases (equipment is the limiting factor) by adding a second shift and outsourcing rather than purchasing additional equipment or machinery until you are certain that sales will provide a long-term return on investment for the new items.

These actions should see you through the short-term economic difficulties and put your business in the best position for sustained growth and profitability for the long run.