How to survive an economic slowdown.

Next to opening the front door for the first day of business, surviving a financial lull may be the greatest challenge facing small business owners. With a failure rate of more than 50% in the first five years, small businesses fight an uphill battle from the start. Among those that don't survive, there often are telltale signs, indicates John J. Keough, director of client services for management consultant George S. May International Co., Park Ridge, Ill.

"The biggest mistake small business owners make happens long before the first day of business--not enough capital." Another common failing is not enough emphasis on quality, both in production and the marketplace. "You can't afford poor quality. As the economy slows, competition for market share gets more intense and a shortcoming in quality or finances becomes even more apparent. But if you're running the business right, you'll be prepared for an economic downturn while your competitors are running scared."

To help prepare for bad times, Keough offers these tips:

* Do not panic at the first sign of a slowdown. A downturn in your business can be self-fulfilling because you've taken steps to cause it. Keep your receivables under control without impairing your ability to do business.

* Don't tie yourself too closely to one customer. Many small business owners catch cold every time the customer sneezes. While it is important to have key customers you can rely on, you don't want to be so restricted that the loss of one or two damages your business beyond repair. Look cautiously for ways to expand.

* Get the money. Some businesses that rely on repeat bids, such as contractors, sometimes are lax about pressing clients for payment. Once contractors like this get in trouble, they lose the ability to bond and thus lose even more business. Change your attitude. Get the money.

* Convert your costs to variables. The fewer fixed costs you have, the less you can be hurt by a downturn. A large manufacturing facility is a fixed cost, so look for ways to farm out...