Small business owners embody the phrase "entrepreneurial spirit". Surpassing more than 25 million nationwide, small businesses, including those in the pet care industry, drive today's economy. These businesses produce millions of jobs and more than half of the United States GDP.

At the same time, these challenging economic times can be particularly difficult for business owners in all industries. It might be time to make some changes in your business - find ways to cut costs while maintaining profits; shift your business expense structure to remain successful. As you deal with these changes, it is important to be equipped with tools that can help your business weather the economic storm. It's time to be resourceful and to evaluate your business relationships and finances.

Evaluate your Business Relationships

Now is the time to get to know your customers better. The more you know about their behaviours, attitudes, wants, and needs, the better you can serve them. Look at products and services your customers buy that are similar to or related to the ones your company sells. Can you add additional products and services and increase your revenues? In the long run, the customer-centric model will beat the product-centric model every time.

National surveys show continued declines in customer satisfaction in many industries. Customer expectations, on the other hand, are rising. Customers want special treatment - and they deserve it. They are why you're in business and, in the end, happy customers translate to higher sales.

Evaluate your relationship with your employees, too. Are you hiring and retaining good people? Your employees are your most sustainable competitive advantage. Your competitors can copy your technology and products - sometimes virtually overnight - yet they can't copy talented, dedicated and caring people. Hang onto your good employees in tough times - you'll need them then and when you're growing again.

Evaluate your Business Finances

One of the most important things you need to do is thoroughly evaluate your finances. Monitor your financial statements carefully and make sure you understand your sources of revenue and expense - including your investments in receivables and inventory. Remember, cash flow is important, and businesses that carefully manage cash have a better chance of survival and success.

You may also want to explore alternative sources of credit. You may be able to borrow or arrange for extended terms from equipment manufacturers, suppliers, and even your landlord. Talk to a trusted financial advisor about asset-based lending to free up cash. Keep in mind that these sources of credit may carry higher interest rates, yet one of them may be the right solution to get you through tight times.

If you decide you need more capital, keep a few things in mind to help make the process easier, and to help you achieve or maintain financial success:

Remember - Cash is King

Even growing, profitable businesses go out of business if they run out of cash. Use a cash-flow forecast to identify and plan for cash shortages, especially while your business is "ramping up" and during any slow periods.

Have a Passion for Profitability

"Just say no" to business that is not profitable or does not fit your business strategy. Healthy profitability allows your business to continue and achieve its goals and mission.

Start With Your "Bootstraps"

Self-finance your business if you can, then look to family and friends. Have your equity (down-payment) ready when you look for a lender. If you are starting a new business, your lender will expect you to provide anywhere between 10-30 percent of the needed capital.

Be a Numbers Person

Those pesky numbers and financial statements represent your investment and hard work. Use them to make you smarter and your business more successful.

Work your Budget

Whether you are starting or expanding your business, create a detailed budget. One of the most common mistakes is underestimating costs. Make sure to include costs for occupancy (the space your business will use), equipment, furniture, supplies, soft costs (legal, accounting, permitting, licenses), working capital, and funds for any short-term losses during ramp-up.

Establish and Secure the Credit you Need

For every business, establishing good credit is an important and ongoing financial priority. Regardless of size or industry, business owners will require financing for a number of needs such as seasonal working capital, financing accounts receivable and restocking inventory.

If you decide that you want to seek funding from a financial institution, there are a few things to consider. Before any financial institution extends credit, it wants to be confident that it will be repaid. Typically, lenders ask the "Five C's of Credit" questions, which help them develop a profile of applicants. Together, these measurements can help businesses get a good overall view of their company's health.

Character - What impression does your credit make on the lender?  To determine your ability to repay the loan, the lender will review your personal history of credit management, including your FICO score and possibly, the details of your credit record. Maintain a clean personal credit file, and avoid sacrificing it for the sake of the business.

Conditions - how, precisely, will the money be used? Will the money be used for working capital additional equipment or inventory? Is there a reasonable and logical business purpose for the loan? Describe in detail the intended purpose of the loan.

Capital - how much of your own capital have you invested in the business? There's no magic formula here, but a substantial personal stake will help show the lender that you will do everything in your power to make the business successful and repay the loan. Demonstrate your personal financial commitment by investing in your business.

Capacity - how precisely, will you repay the loan? The lender will consider the cash flow from the business, and the probability and timing of the repayment. Establishing a deposit account with the prospective lender can be an excellent way to show your cash flow firsthand.

Collateral - what forms of repayment security can you provide the lender? Credit can take both secured and unsecured forms. For many small businesses, simple, unsecured lines of credit may suffice. But as you seek more sophisticated credit products, lenders may want to see collateral in the form of equipment, buildings, accounts receivable and even inventory. When appropriate, show hard assets backing your loan request.

Additionally, many financial institutions will look at a sixth "C" - whether you are a Customer who has established a solid working relationship with the financial institution.

These are tough times - but they're not all bad. Tough times force us to think of better ways to reach our goals. By keeping a close eye on your business and the customers you want to reach, remaining agile and following sound management practices, your business can survive - and thrive - until the economy improves. In fact, tough times can be an opportunity to create a stronger, better business.

Source: By Nancy L Webb Source Pet Services Journal January / February 2009