Published: April 27, 2009 06:15 pm      

OPINION: When good isn’t good enough

When consumers get scared and spend even a few percent less, the results can spell disaster for a lot of businesses. It’s like “trickle-down” economics in reverse.

Most businesses don’t need to lose 40 percent of their sales to be in trouble. A decline in sales of 20 percent will push many businesses close to the edge. Combine the decline with increases in overhead and you start seeing a lot of “For Lease” signs.

Much of my personal experience comes from operating a retail store for the past 10 years. Over the last two years, I have watched traffic and sales drop steadily. I am not alone, as businesses similar to mine have felt the impact of imports, Internet competition and a general decline in interest in our product.

While many factors are beyond my control, I have to take my share of the blame.

Like many business owners, I became complacent. I relied on my regular customers to keep me in business. It wasn’t that I did a bad job. I opened the store, presented my product reasonably well and tried to treat my customers in a fair and honest manner. For many years, it was good enough to keep the doors open. But now, it seems good isn’t good enough.

Lately, I have taken a hard look at what I need to do to still be in business two years from now.

Greater profits for a business come as a direct result of increased sales, increased profit margins and decreased overhead — or a combination of any of the three. In today’s competitive market, increases in profit margins are unlikely. That leaves the best two out of three.

The first step for most businesses in their fight for survival is to carefully review operating expenses. If it’s not essential to the needs of the business, don’t spend the money.

I knew a successful airline executive that questioned all proposed expenses that crossed his desk with the same question: “How many tickets do we have to sell to pay for it?”

That same question should be on the lips of all small business owners. If it doesn’t contribute to the bottom line, don’t spend the money.

The best solution for most businesses is to find a way to increase sales. Increased sales generally result in increased profits. Greater profits allow businesses to spend more money, which in turn, has a positive effect on the economy.

Expensive advertising is not an option for most businesses.

Recently, I was reminded that there are ways to promote your business without spending money.

I was having lunch at a restaurant near my store when another patron spoke to me. In a few minutes of conversation, he had introduced himself, told me about his business and given me his card.

I began to think about how long it had been since I had told a stranger about my business. For that matter, when was the last time I had called a regular customer that I hadn’t seen in my store recently?

Another thought that crossed my mind was to question if I was really listening to my customers. Did I have the product they wanted? Was I open when they wanted me to be? Did I serve their needs? Successful businesses listen to their customers.

The greatest danger for most business in troubled times is to accumulate more debt. Debt, even in good times, poses a danger to the long-term well-being of a business. While not impossible, it’s unlikely, in light of the current economic situation, that spending money you don’t have will solve your problems.

Another pitfall to avoid is extending questionable credit to your customers. Realistically evaluate their ability to pay in a reasonable period of time. I have learned the hard way that it’s not a sale if you don’t collect the money.

The next couple of years look to be tougher for most businesses. A lot of businesses will not survive. Some will be forced out, and many will close of their own choosing when they come to the realization that the return is not worth the investment in time and resources.

The businesses that survive will have become lean and mean. They will be the ones that found ways to adapt to a changing world. Even the toughest times can be an opportunity for success.

Andrew J. Albatys is a long-time Southern Indiana resident who attended the University of Louisville. His self-named Indiana-based company specializes in estate and commercial liquidations. Albatys also operates Antiques at Douglass Loop, a retail antiques and collectibles store in Louisville.