How To Run A Small Business In Time Of Crisis

by Jacques Sprenger on 2008-10-1916

Here’s how to maintain and run a small business during this economic downturn.

Small business owners are concerned by the present economic crisis, and justly so. But they should not forget their employees, be it one or ten people. They have their own families to support and the present crisis causes them to fear a pink slip in their next paycheck.

I remember my days as a small restaurant owner way back when computers and cell phones were sci-fi concepts. The times were hard and I was desperate to save my business. I finally had to sell it to another person (at a loss) with illusions of becoming rich in a short time. Had I known then what I know today, I could have persevered and reached my goals within a few years. There is no more profitable business than the food business, except maybe being a politician (and with less effort) 😉 .

I therefore wish to offer the following suggestions in the hopes that they benefit your small business and your payroll (or at least, most of it):

small business, general store
Photo by Svadilfari

How To Run A Small Business When The Going Is Tough

  1. Make sure you talk to all your employees, from the bookkeeper to the cleaning lady about the status of the business. They have a stake in it just like you. You don’t have to reveal your actual numbers, but you do have an obligation to give them a general idea of what’s going on.
  2. If you absolutely have to let go of somebody (remember how costly it is to train another person), give them plenty of time to search for another job. They’ll thank you for it and, who knows, they might come back in the future.
  3. A friend once came up with a money saving idea for his software business. He gathered all his employees, many of them highly skilled, and told them that the company was struggling to survive. He said that instead of cutting the payroll, he would offer them the alternative of cutting their salaries by 25%. Most of them agreed except for a few who preferred severance pay.
  4. Evaluate your resource usage and thoroughly investigate how much waste is generated by your business. Do you leave the lights on, do you use power saving bulbs and appliances, do you give proper maintenance to your computers to avoid costly repairs? Reviewing your utility bills is a good first step.
  5. Check the price your suppliers offer you. Is there somebody out there who’ll give you a better deal? Instead of home delivery, would some clients accept in store pick up for a discount?
  6. Ask your employees to come up with money saving ideas and reward the best ones. They know best what’s going on in their specific work areas. For example, do you really need an expensive copying machine or would it be cheaper to have it done somewhere else?
  7. Do you need that company car for deliveries or could you do it with a cheaper motorcycle? Or you may want to plan your route when you go visiting customers so as to save on gas.
  8. Sometimes, your own employees could be spending money on private phone calls and surfing the Internet during company time. This is certainly a nice benefit to provide your employees, but it may be wise to apply limits in these areas. Establish controls and safeguards to manage these behaviors after asking them to limit calls to emergencies and high priority matters.

Remember that by surviving the economic crisis, your business will be much stronger once the recovery starts and you will be positioned to take advantage of the more favorable business conditions.

Contributing Writer: Jacques Sprenger

Copyright © 2008 The Digerati Life. All Rights Reserved.

{ 13 comments… read them below or add one }

Erica Douglass October 19, 2008 at 12:14 pm

Hi Jacques,

You wrote: “There is no more profitable business than the food business.”

Do you have statistics to back this up?


Curious Cat Management Blog October 19, 2008 at 2:45 pm

Good advice – so many panic and fail to consider the long term. Also focus on cash flow. You can be making a profit and run out of cash. Especially in the current market conditions focusing on cash is important.

DES October 20, 2008 at 5:35 am

I am a small business owner and I appreciate this blog. I believe in showing consideration and fairness – it is the basis of a lot of your employee advice in this particular blog. It has always worked for me.

Curt October 20, 2008 at 7:29 am

Excellent article.

I would add – consider increasing your marketing and sales efforts. When a market decreases and some of your competitors go out of business, they customer are looking for a replacement. If you find these displaced customers first, you can gain market share as your competitors go out of business. When the economy turns around, your business could become the new leader.

Jacques Sprenger October 20, 2008 at 4:17 pm

To answer Erica’s question regarding “facts to back it up”. Please, Erica,why do you think that everybody and his uncle are opening small restaurants, only to fail (90%) within a year? Just sit down at your kitchen table, as I did, and figure out the real cost of a simple hamburger sold for between $3 and $6. Add all the ingredients, even the salaries of your employees, taxes, utilities, rent, etc. and you still come up with over 50% net profit for each hamburger. No other industry gives you that margin.

Jacques Sprenger October 20, 2008 at 4:19 pm

Curt, thank you and you are absolutely right. I did recommend increased sales efforts in another post related to tough economic times. If you manage to stay in business, you’ll reap handsome profits once the recovery starts.

Thank you, Curt

The Financial Blogger October 20, 2008 at 5:45 pm

I believe that letting your employees know what is going on in the business could help creating a great team spirit. Everybody can get together to find a solution.

We are all aware of the current economic situation so I guess that I would be willing to give more to my employer in order to keep the place open.

On another topic, I was wondering where you get that info from the profit made from restaurants?

Donny Gamble October 20, 2008 at 8:02 pm

I think it is a great asset to own a small business in these times. You don’t have to rely on corporate America laying you off and choosing how much money that you make.

Escape Somewhere October 21, 2008 at 4:37 pm

I think advertising can make sense in some cases but it should be done carefully. If your customer base is decreasing advertising in some cases could increase losses. I imagine its specific to industry and location.

Jacques Sprenger October 26, 2008 at 12:26 pm

Donny, I used to own a small restaurant when I was much younger and inexperienced. Ditto my father who was an excellent cook. I had to calculate costs and overhead to establish prices and believe me, the profit is huge. Just look at McDonald’s and other fast food restaurants. There is one in every corner. Now a fancy food place is much more difficult to grow due to the need to invest so much in the “atmosphere”, that is fancy everything (furniture, decoration, uniforms, lighting, etc.)
It is difficult to succeed because there is so much competition, so location is everything.

Raul January 24, 2009 at 7:21 pm

Hello everyone,

This is a great site, and I appreciate everybody’s comments. We currently own a small restaurant, but oh my goodness, I can’t believe how much time, money and hard work it takes to keep it running. Do not get me wrong, we love to have it, and we treat our customers with respect and courtesy.

My question is: does it really take 5 yrs to see profits? or longer shorter?

You have a great day and take care.


Silicon Valley Blogger January 24, 2009 at 7:42 pm


Your question is a hard one to answer. It depends on what kind of market you are in, what your restaurant is about, whether you have demand in your neighborhood for the food you serve. So the short answer to your question is unfortunately, going to be vague: I’d have to say “it depends”, as there are way too many factors to consider when gauging the potential of a business. You’d have to do your own market research to determine this. Perhaps what people here are offering you, is the ballpark or average length of time for a restaurant to incur profits.

If an experienced restaurateur can come here and comment about this, I’d be extremely grateful. But as it is, I’m not an expert in this particular business.

If you ask me about the blogging business, I can give you more exact — and possibly, interesting — answers.

Damani Warren April 4, 2010 at 1:51 pm

i am a auto shop owner in jamaica and recently, it’s becoming harder to pay my vendor. My sales are above break even but am still having problems!

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