Back to Fundamentals: How Small Businesses Are Weathering the Recession

Navigating a bumpy road requires good planning.

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With the recession and all, most of us in small business and start-ups are clearly short on liquidity, short on financial resources, short on sales, and short of temper, too. The one thing we're oversupplied with is obvious advice on how to weather the recession.

My E-mail is full of vendors offering webinars on how their stuff will help me get through the recession. My blog reader headlines offer lots more of it. We're all supposed to cut costs, pare down expenses, of course, but not our marketing costs or sales expenses. We're supposed to lay people off in groups, but we're also supposed to not panic, and remember how much it will cost us to find and train new people. We're supposed to concentrate and focus on our best customers, unless of course we're supposed to beat the bushes to find new customers. And stockpile cash, too.

Don't forget about the cash. The venture capitalists are suddenly all talking about runway, meaning how long their investee companies can last writing checks to cover their burn rate, without bringing in money. Yesterday I watched one of the smartest VCs I know talking about how his firm's companies are supposed to have 18 months of burn rate covered. That, of course, isn't the real world. In the trenches, we do what we can.

And the trouble with most of this sudden flood of staying-afloat advice is that it's either way too obvious or way too generic. And it's way too contradictory.

What we're doing, in my company, is focusing on the fundamentals: specifically, planning. We're watching our numbers, looking for bad or good news in the comparison of planned vs. actual sales, trying like mad to catch the signals running through our numbers during this madhouse time of crumbling financial system, the election, and now the anxious wait for a new president-elect to begin to operate.

You have to understand, of course, what planning really means. It's not guessing the future today and following that guess tomorrow no matter what. That may be a common myth, but it's way off. Real planning is visibility, setting down assumptions and directions and then watching, these days watching very closely, as reality rears up its ugly head and plays games with assumptions.

Planning is leaving tracks, and then following up with what went differently and how to respond. As things get crazy, shorten the timeframe; watch more closely.

It's a lot like steering. As the road gets bumpier, or the curves get tighter, or the visibility goes down, you focus and concentrate harder.

Tim Berry is president and founder of Palo Alto Software, founder of bplans.com, and a co-founder of Borland International. He teaches starting a business at the University of Oregon. He is author of books and software including Business Plan Pro, published by Palo Alto Software, and The Plan-As-You-Go Business Plan, published by Entrepreneur Press. he has a Stanford MBA degree and degrees with honors from the University of Oregon and the University of Notre Dame. He blogs at Planning Startup Stories and Up and Running.