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June 1, 2001 - The
economy isn’t bad right now, but the predictions aren’t so great. So what is the
small business owner supposed to make of it all?
It’s
not time to panic, Millian says, but a little caution can’t hurt and could help
you be prepared if all the economists’ predictions come true. The best thing to
do is to review your current business and any plans for the future and rethink
how a weakening economy might affect them.
First, Millian says to take a look at your business’s current expenses. “Now’s
the time to go through and take all the frills out of your expenses,” Millian
says. “When times are good you might start spending money on things you wouldn’t
otherwise.”
For
instance, you’ll want to review your insurance carrier and do some shopping
around to see if you can find better rates. “When things are going well, you’ll
just pay whatever your insurance agent quotes you because a few extra dollars
don’t seem to make a big difference.”
You
might find a better rate and your cost savings might seem small, but if you
review all of your expenses in this fashion, the savings can really add up.
“Also
take a look at overtime because that’s where a lot of money goes.”
If
you cut back on overtime, it might require you to put more of your own time back
into your business, but that doesn’t always have to be a bad thing, Millian
says.
“What
makes you different from the big guy is personal service,” she says. “So now’s
the time to stop the traveling and golfing and get out there and meet and greet
your customer one-on-one.”
Such
personal contact could make all the difference in how your business survives a
tough economy. “That’s what keeps the customer happy, and they’ll support you to
the very end if they feel you care.”
Looking to the future, this is not the time to think about expanding your
business, Millian says. “You always want to be out there getting new business,
but you don’t want to think about making big moves like taking on a new partner,
buying another company or moving to a larger office right now.”
But
the time may come when you may have to look at laying off employees and there
are some steps you can take now to prepare.
“If
you put more of your own time into your business now, you might be able avoid
laying people in the future,” Millian says. “There is also some tax planning you
can do now to ease the burden of laying people off later.”
“You
need to understand that you the business owner will be the one to pay the
unemployment tax for laid off employees – not only once but twice,” Millian
says. You’ve been paying unemployment tax into a fund and your tax is based on
your history of unemployment. Once you lay someone off and they collect
unemployment, you have to replenish the fund. But you will also begin paying
more in unemployment tax because your company’s history has changed.
“The
assumption by Michigan’s unemployment division is that you will need to pay that
much every year on an ongoing basis, not just this one time.”
There
is something you can do now, however, to reduce your future unemployment
liability. “Start putting some money aside so that if you have to lay off an
employee, you can pay a lump sum into your fund,” Millian says. “That will keep
your rate from increasing in the future.”
“This
is something to look at and run the numbers to see if it will benefit you,” she
says.
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