First Person: The Various Ways I've Kept Small Businesses Going Through Recessions

How do I keep my small business going through a recession?

That's a question a lot of small business owners are asking right now, and as a small business owner I have to deal with it right now as well, although on a little different basis. I had to contend with it about 15 years ago in another business that was a little more straightforward; so I would like to examine this question on a comparative basis.

Today, besides writing, I own a tiny snack shop and a booking company. There are local venues within a 30-mile radius that need musicians to play for various events. As such, I have a cadre of guitarists, pianists and singers on call.

In 1998 I owned a small taxi company. We were cutting-edge in that we advertised on the back of the cabs' windows with a "running sign." We could sell up to 85 commercials on each electronic sign.

We hit a snag in 1998 when the economy sunk and gas prices went sky high. Further, the city would not and had not allowed for a rate increase for a number of years.

Let me share with you moves I made then and moves I have made today.

First with the performers I used to allow the venues to pay me a percentage of the draw the performer garnered. Let's say the performer brings in $3,000 of business, then I would get $450 or 15 percent. The performers would have to pay their own gas expenses to the show.

With gas at about $3.50 and up per gallon I have had to ask the venues to pay that cost. Further I have had to ask for a guarantee versus the percentage. Why? All costs have gone up and, frankly, much of it is due to fuel. In fact, not just my business expenses but my personal expenses have also gone up. Of course gas has gone up as well as food. Our Sunday newspaper went from $2.00 to $3.00 - just an example of the increase in personal expenses.

Today it costs me much more to advertise. Further, some venues are discontinuing having shows. Therefore I am forced to go to larger cities and college towns which takes more gas and more advertising. It is a matter of having to create new accounts as well as renegotiate old accounts.

Even my internet costs have risen.

I occasionally use a line of credit with the bank or credit union. These have gone down. You can get less money on your signature so if you run into a temporary snag it is harder to make it until you get to smooth sailing. I did have a line of $5,000. It has been reduced to $3,000.

My overall business expenses have moved from $5,300 to create a $1,000 profit (told you it was a small business) to $6,300 per month and the profit unknown so far although it will be less and unless I get the venues replaced within the next 45 days the business will be in jeopardy.

Besides the plan I've relayed I intend to get a professional telemarketer who I will pay by commission to get interested venues on the hook for me.

As far as the snack shop, it is more of a volunteer issue. I maintain it and run it for services to seniors. So far it has not been dramatically affected.

Let me take you back to the taxis. That taxi business brought in about $60,000 per year. However the lien on the cars was $1,000 per month as was the insurance. Maintenance took about $300. It was a business I tried to dignify but had trouble doing. When gas went dramatically up there was little I could do because rates were set by the city.

I increased advertising costs. I increased the share the drivers had to pay for gas however as "fair-is-fair" for that I gave them all two company customers as exclusives that they could use as a center of influence.

An idea that I came up with was to "sell" the customers "contracts" in the company. A customer would pay the company $10 and the company would promise them $11 in six months. I had checked with our attorney to see if it was legal and a company was free to do that. Of course they better pay the money back.

I wasn't prepared for what happened. Riders started to tell other people about it and because many of them were poor this was the closest thing they came to investing-they found it fun. This idea got us through the gas increase for 18 months until a rate increase was issued.

The company's revenues from this idea jumped $10,000 to $70,000 and covered the increased expenses. Everyone was paid back.

To get through a recession a business must look at its client base. They must look at who they have employed or what they are paying them. A salaried sales manager perhaps has to have his pay tied into sales results.

In the case of the cab company, I also had to delay buying a new car and that was hard on maintenance costs.

Cash flow is the name of the game. A good relationship with your bank can get you through tough times but my suggestion when times are good there is nothing wrong with having an emergency fund that is large. There are always business employees who want every penny invested "to maximize returns." The problem is when you hit a recession you often need liquidity and the banks get stingy fast.

These are some ideas I've used to stay in business both "yesterday" and "today." I hope they help.

More from this contributor:
Reducing Small Business Start-Up Costs: Business Cards, Cell Phones and Marketing
Key Issues to Consider When Moving Your Business
Lessons From My Business Consultant