While homeowners received assistance from the Federal Emergency Management Agency and private charity groups, there are no grants to help small-business owners recover from flood-related losses. There are emergency loans available through the Small Business Administration for businesses with losses from the early May floods.
While new business loans may be necessary to get a business operational after the flood, it is important to think carefully about the long-term impact of taking on additional debt. The use of debt brings added risks.
New debt will add to the overhead of a business. This means that additional sales and profits are necessary to cover the additional monthly expense associated with repaying a loan. And, just like most small-business loans, this new debt will need to be personally guaranteed by the entrepreneur and secured with personal assets, such as the owner's home.
My advice to entrepreneurs trying to get back on their feet after the flood is to minimize the use of any new debt. You can do this by getting back to your startup roots, becoming a bootstrapper once again.
Keep operating costs downBootstrapping — the collection of tools and tactics that entrepreneurs use when they have limited resources — already has become a crucial business skill in today's tough economic climate. The added financial pressures facing small-business owners because of the flood make the use of bootstrapping that much more imperative. The goals are simple:
• Keep your monthly overhead to a bare minimum as you rebuild, to allow cash flow to support your growth as much as possible. This will help you get back to break-even sooner.
• Maximize the use of marketing that can be done without spending a lot of money, using things like word of mouth, social media and viral marketing. Your message should always be directed toward a specific niche. Know who is in your company's market niche and find the most effective, targeted ways to reach those consumers.
• Also, keep close watch over employee costs. Rehire your staff only as you can afford to with existing cash flow.
• Keep your operating costs down. Operating costs include expenses necessary to produce a product or provide a service. Controlling operating costs by using temporary outsourcing can help your business get back to break-even that much sooner.
Help is available for those who want to use bootstrapping to recover from the flood. A Nashville-based group called Better Bootstrap meets monthly to share ideas and best practices.
Recovering from the flood will not be easy, but with a return to one's bootstrapping roots and careful planning, many companies will bounce back stronger than ever.
Jeff Cornwall is director of the Belmont University Center for Entrepreneurship and the Massey Chair in Entrepreneurship. He writes a column on issues facing new business owners and would-be owners. Contact him at jeff.cornwall@belmont.edu. His daily blog can be seen at http://www.drjeffcornwall.com.
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