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Major economic recession has become a part of our lives. It’s been building for years now (or descending, as the case may be) and the October crisis has made it very clear that for the time being things will be tight. However, that won’t always be the case, and it’s time for companies to realize that if they don’t start working to retain their best employees now, they won’t be able to when the options are once again open.

That is the upside of the economic crisis for many companies, isn’t it? Lack of opportunities mean that your best employees aren’t going anywhere, and the effort that it normally takes to retain them is unnecessary. “Employee retention” is simply a code word used to justify exorbitant and unearned bonuses. However, this has also allowed companies to acquire and use wonderful talent at prices they otherwise wouldn’t have been able to, making way for these talented individuals to potentially develop innovations that would help the industry, whichever industry it might be.

The problem is that the economy will not always be in a downturn. Eventually, it turns back up. If you look at the economic history of the United States, for example, you’ll see that since its inception it has undergone roughly 10-15 year bust-boom cycles that only ended in the mid-1940’s after New Deal reforms. We had roughly 50 years of prosperity that was then followed by a little over twenty years of market volatility surrounding the slow dismantling of those reforms. The economy will eventually start moving back up again, and the smart, dedicated employees that were such a bargain will find new companies to work for or strike out on their own and eventually be your competition.

The only way to avoid that eventuality is to start retaining them now. I’m not suggesting bribing them with string-free paychecks or unsavory proposals like some Mafia goon, but rather re-evaluate the way you deal with them. Instead of contractual bonuses, return to an older system where bonuses are given based on merit, and make sure that they realize that you’re showing your appreciation for their dedication and loyalty. Embrace informality and encourage discussion at all levels of the company so that your employees feel like they have a stake in the future of the corporation. Most importantly, structure your corporation in such a way that employees are not cut off from one another. If your top executives feel as if they are alone and not part of a coherent whole, they are more likely to see themselves as only beholden to one person, rather than a vital part of a working group.

Business owners and CEOs have been able to get away with a lot in the past few years because of a pervading feeling of “I’m lucky to have a job at all.” That will end though, and if you wait then you may find it’s too late to retain the brilliant minds you picked up on discount during the Recession Sale.

During economic crises, it’s tempting to grasp at any line one is thrown. This is especially true of business owners and prospective business owners who might not find banks and traditional finance options very tractable in regards to their specific business. Please see my blog entry on banks, Big Banks Ignore Bailout Promises for more of my opinions on that. However, as a result they tend to fall for the same things any other consumer does on a regular basis: clever marketing and a sales pitch. I refer here to so-called “angel investors.”

I do consider myself a bit of a moderate, perhaps even a peacekeeper, so I’ll hedge myself by saying that not all angel investors are this way. However, there are enough that take advantage of the visceral reaction that people have to the word “angel” to make it seem as if they are somehow doing a company a favor by investing in them, meanwhile requiring that monetary goals be met that tend to lead to negative amortization. It’s really no different than the sub-prime lending practices that seem to have been at the root of the global economic crisis to begin with, only instead of making home foreclosure an inevitability, this makes business closure, sale, or takeover a likelihood.

The trick to avoiding getting involved with one of these criminals is first to not panic. The moment you begin to believe that your business is going under is about the same time that any loan shark (another loaded word that more accurately describes some of these rogues) can come in and offer you terms that  will still leave you ruined in the end. The next step is to carefully consider all aspects of any potential loan, be it from a bank, venture capitalist, or angel investor. Have your lawyer and financial advisor look over the paperwork before you sign. Most importantly, do some research on your angel, make sure they are who they say they are and talk to some of the other people they’ve invested with. If most of the businesses they’ve invested in are no longer around, there’s a good chance they pulled their support when it was crucial or took over the company and sold it off as part of the deal.

Not everyone who is willing to loan you capital is your friend. It’s easy to believe that the way things are now, but it’s desperation that so many people like this feed on. Fortunately, you’re too smart to fall for that, and will be sure that the angel who comes to the aid of your company is not really a demon looking for a 20x-30x return on their investment in five years or control of the company.

One thing that old timers like me have to realize is that old timers like me are not the future of business. We’d like to pretend that we are, that our ideas will remain fresh forever, that we can continue to think ahead of the curve, but the truth is that our minds get slow, our thoughts fall into ruts, and in the end it’s the young that will innovate the markets, not people like me.

The problem becomes that people like me tend to not trust the young for the very same reasons that they are exactly who we should trust. We feel that they are inexperienced, they lack knowledge of “how things work,” they have no respect for tradition, specifically traditions designed to keep the senior people in power and slow down progress. We worked out way up through this system and don’t see why the next generation can’t as well. The honest reality, however, is that it’s not being a part of a failing, obsolete system that makes them so desirable as employees.

But, as a mock inspirational poster I saw pointed out, “Tradition: Just Because It’s How You’ve Always Done Things, Doesn’t Mean It’s Not Incredibly Stupid.”  The system that was put into place when I and my predecessors were coming up in business is no longer viable to the modern work environment. That has a lot to do with speed. Things simply move too fast today to ask everybody to slow down and wait their turn. This is especially true of ambitious young minds with new ideas and business models to work with.

If you want fresh ideas, it’s time to look to a fresh place, and that means young people. It’s worth the risk that they might replace you one day. In fact, odds are they will. It’s the nature of business, so accept it and succeed while you still can. Take a chance on youth and you’ll often find that they won’t disappoint you.

Small business owners have a lot to worry about these days. With all of the brouhaha over health care reform in the United States, it’s easy to believe that any plan will somehow negatively impact business, costing more money to employers by requiring them to provide health care at a certain level to their employees. However, I don’t think the situation is as dire as many would make it out to be.

Let’s ignore for a second that many businesses of all sizes are complaining that they might have to provide their employees with health care benefits that actually meet the needs of a person living in this country and focus instead on how health care reform can benefit business. I’m referring here to the Small Business CHOICE Act (H.R.  859 http://www.govtrack.us/congress/bill.xpd?bill=h111-859) .

This is an important piece of legislation for small businesses since it provides for two major benefits. The first is that a 65% tax credit would be given to businesses who take advantage of the opportunities this bill would afford, making providing quality health insurance much more affordable and reasonable. The second is much more radical, however.

Several small businesses would be able to pool their resources into voluntary health cooperatives, giving themselves a larger pool of potential employees and, by extension, more negotiating power with insurance companies. This allows smaller businesses to compete with larger companies in terms of benefits and encourages insurance companies to take another look at smaller firms that they would otherwise dismiss as being not worth the effort.

It’s fairly clear from my previous blog posts that I support companies working together to improve how they deal with customers and employees. In this case, businesses are being paid to do exactly that.  Small firms could save over 34% per year if this bill were to go into effect, and there would be fewer uninsured Americas as a result.

It’s easy to panic when the government begins to pass laws regarding how businesses should be run, and it’s not their place to do so in most situations. However, it’s important to look at every piece of legislation individually and examine it for its merits. In this case, the Small Business CHOICE Act is a benefit to companies, encourages competition, and will ultimately save you money. It’s solid legislation and not worth the alarm.

I’ve often heard small business owners wonder how to cut their capital output. All businesses have a finite amount of money to work with, so smart practices that help them spend less of it are always in demand. That’s why programs like service exchanges are such a good idea.

For those who haven’t heard of it before, a service exchange is where two businesses, rather than charge one another directly for complimentary services, perform the functions of their business for one another instead.  For example, a cleaning company might do monthly carpet treatments for a consulting firm that pays them in discounted or free service.

Now, the big problem with this is that there is a certain outset of money involved in service exchange. Our example cleaning company still needs to pay its cleaners, buy solutions, move their supplies, etc. The consulting firm has to spend time and resources developing strategies. However, the time and supplies are still a small fraction of what full charge would otherwise be for what they are receiving, especially new businesses that may not have a lot of business yet to keep them busy.

More important than the monetary incentive is the social one. No business can thrive on its own. It requires the good service of other companies, people who it depends on for resources. I wouldn’t suggest that any company wouldn’t do its job when being paid for the service, however too much distance between a company and a supplier means they have no personal incentive to go above and beyond for you. Service exchanges cut down on monetary gain, but they create a close relationship with a supplier who may be able to help you with referrals or at the very least will work harder to recognize the “favor” you’re doing them.

It may mean working for less or even for free, but a service exchange encourages communication between businesses and gives you an opportunity to do what you do best in exchange for what somebody else does. Moreover, the savings in capital outlay will add up very quickly.

These days business is harder than ever. With the worst global economy in history, there is less room for mistakes. There are also more people out of jobs and starting their own businesses. There are myriad pitfalls that can quickly sink a new business.

Hiring a Business Consultant can help you avoid costly mistakes and help you stay in business and grow your business. The cost of a business consultant should be looked at as an investment in your business rather than an expense.

The trick is finding the right business consultant.

Here is a great article that tells you “How to Choose a Business Consultant“.