The Crisis May Be a Boon for Some Small Businesses

By GENE MARKS, BUSINESSWEEK

Posted: 2008-11-04 12:40:38

From cheaper real estate to old-fashioned attention from banks, small businesses owners may see some good times ahead.

Yes, it's definitely bad out there. And it will probably get worse. But most small business owners like me can also find some hopeful signs coming out of the financial nightmare gripping this country. I'm talking about people who have been running businesses for a while, who employ people, and have customers. Startups are a whole other thing (and good luck to them at the present!). It's those established business owners who will see some benefits of this mess in future months. Here are a few reasons why.

We're about to have a better relationship with our banker than we've ever had.

Know how over the past few years banks have been ignoring us, chasing the big money? Remember when we used to get tickets to the ball game or taken out for a round of golf? It's going to come back. Suddenly, those boring little local banks that lent money to small businesses with actual assets are looking pretty smart right now. Surviving institutions, their egos bruised and their credibility in ruins, are going to want to be just like them. Look for a change in the way the banking industry operates. A little more humble. A lot more relationship. They've taken their eye off the ball, chasing those subprime mortgage pots of gold for too long. Prepare for a resurgence of the old fashioned banker. Our businesses will be better off because of it.

We'll forget about stocks for a while.

In the good old days of the Dow 14,000, it looked as if the sky was the limit. Hey, why not take that extra cash and invest it on Wall Street? Who cares about that peeling paint and underpaid manager? We don't need those product enhancements or new machinery. There's money to be made with that guy from Merrill Lynch!

Well, we've all been burned a bit. And that guy from Merrill Lynch is serving me pepperoni slices at the local pizza shop. We've learned a lesson. Maybe investing our excess funds in better equipment or our people is a better long-term investment than that mutual fund holding securities in a company I've never heard of. Now that the stock market has lost its shine, business owners will start doing what we should have been doing all along. Reinvesting our money into our own companies is good for... us.

We'll rediscover our balance sheets.

Those bankers I mentioned before? Well, not only will they be paying more attention to us but they'll be paying even more attention to our financial statements. Those quarterly numbers and covenants from our loan agreements that they always seemed to overlook because they were too busy chasing those other big deals? They'll be looking at them now, trust me. Get ready to face some scrutiny. The last thing these bankers want is to get burned again.

But this is not a bad thing; it's a good thing. Quarterly financial statements and debt covenants are not a punishment. They're great metrics to help evaluate the profitability and value of a company. Shouldn't we have been paying close attention to all of this in the first place? It'll be more difficult to get credit for those companies that probably shouldn't be getting credit in the first place. There will be better financing opportunities for those companies that deserve it. It's time that we all get more disciplined. More prudent. More focused. Our bankers are now going to require this. And for good reason.

We're going to raise our prices.

Why? It won't be just to keep up with inflation (which is probably going to happen from all the money flooding the system by the Fed). It'll be because all of those idiot competitors of ours, without financing and facing a slow economy, are going to start choking on the fumes of their sputtering businesses. Suddenly, not showing up to jobs and doing shoddy work is going to mean something.

We knew they didn't know what they were doing. And now they're going to live down to their expectations. We've always known we do better work. And that our prices are worth it.

But how can we possibly prove it when some knucklehead with half the experience is also charging 20% less? Watch them fall. And watch our prices rise. Recessions and financial crises have a way of pruning the fat from the economy. The strong survive, and rise we shall.

We'll have a little more respect for regulation.

Small business owners, like myself, are loath to give the government credit for anything. We hate red tape and all the things that bureaucracy can to do to a capitalist society. We don't like big government spending or large tax increases. It's just part of our DNA.

But even this right-of-center writer has to have a little respect. It's not 1929 or 1907. There's the Fed and the Treasury and the Securities & Exchange Commission. No, they're not perfect. But they've kept the system going at a time when, historically, it would have imploded spectacularly.

They've so far coordinated pretty well with foreign central banks. Congress is raising the FDIC insurance coverage on our bank accounts. They're stepping in to do something to right all those bad loans. And they're making it easier for Warren Buffett to make even more money. I'm happy for Warren Buffett, too -- he seems like a really nice guy. They have proven to me that there needs to be a role for regulation in a capitalist society.

We'll grab some space, too.

One day the newspapers are crying because real estate is so high no one can afford it. The next day they're crying because prices have dropped.

Well, we're not crying. The bursting real estate bubble means that we can finally, finally, finally buy that building or rent that space at a reasonable price. Not that overly inflated fairy tale of a price we were offered just a year ago. Now's the time to look for bargains. And the bankers will loan us the money... after they've protected us both by doing the appropriate amount of due diligence.

This year's going to be tough while the economy rights itself. But better days for small business owners are on the horizon. If we're lucky, we've got a few bucks in the bank and a few good employees still working hard for us. With that combination, smart business owners, and their newfound banking friends, will take advantage of this financial crisis and turn it into a long-term success.

Gene Marks, CPA, is the owner of the Marks Group, which sells customer relationship, service, and financial management tools to small and midsize businesses. Marks is the author of four best-selling small business books and writes the popular "Penny Pincher's Almanac" syndicated column. He frequently speaks to business groups on penny-pinching topics. More penny-pinching advice from Marks can be found at www.quickerbetterwiser.com.