Employees are a key part of any company and should not be readily sacrificed in the event of an economic downturn, entrepreneurs and small business leaders were told at a meeting held at the Fairmont Hamilton Princess hotel yesterday.

Martin Law, executive director of the Bermuda Employers Council (BEC), warned bosses not to hit the panic button and immediately lay-off staff as a knee-jerk reaction to the current financial crisis, but should instead look to retain their workers for the future success of the business.

Mr. Law was speaking as part of a panel consisting of Hasan Durham, economic advisor in the Ministry of Finance, Felicia Rickards, senior wealth manager at Argus Financial and Ally Black, senior manager at KPMG Advisory Ltd. at the Bermuda Small Business Development Corporation's (BSBDC) 'Economic Stability Matters Breakfast Seminar'.

He said that international business was the driving force of the economy and that any down sizing or reductions in companies' staff numbers would have a major effect on tourism, retail and the construction industry.

"There is a lot of chaos in the world and the financial markets particularly have been driven by fear and fear is contagious," he said.

"But don't let it drive your business decisions - paying close attention to your outgoings will help to sustain your business' profitability." Mr. Law said any cut backs in firms' staff bases must be made for business reasons and not just to ensure their immediate futures.

"I seriously caution against jumping to reductions and lay-offs too soon," he said.

"There are things that you can and should do to help your staff, if down-sizing becomes available.

"Good communication is essential, as is helping staff find other work.

"Keeping your business afloat with the very minimum staff reductions is essential to help keep your business and employees intact."

Mr. Durham then talked about how the state of the economy would be determined to a large degree by the decisions the small business owners make and urged them not to panic because of the economic downturn, but rather to make informed choices based on recent and personal experience.

"If you do not feel like you are in a recession, then the chances are that your business is not in a recession," he said.

"Also, some businesses do better in a recession than in good times, so it is a matter of using your own experience, realising that nobody can make decisions for you and that you know your business best."

Ms Rickards spoke about how the rules for financial planning should be the same during periods of prosperity as well as those of decline, stressing the importance of drawing up a plan to determine where you are, you want to be and how you are going to get there, incorporating a budget, getting rid of unnecessary expenses, having sufficient cash flow and liquidity and focusing on good customer service.

The meeting kicked off with a welcome speech by newly-appointed BSBDC board chairman Larry Mussenden, who talked about today's economic turmoil and the knock-on effect of the US mortgage and sub-prime crisis on Bermuda and the rest of the world, in particular small business owners, their enterprises, clients and homes, adding that he takes economic stability on the Island very seriously.

Stephen Woodward, director of audit for local business in Bermuda, and his colleague Ms Black, then gave a presentation of a blueprint for managing a business through an economic downturn.

Mr. Woodward spoke about the impact of the current financial crisis on small businesses (some of which KPMG works for), including the trickle down effect from the economy's main driver, the international business sector, saying that the retail industry, including wholesalers, department stores and supermarkets, would always have customers needing to buy their goods and was adopting a 'wait and see' approach in today's economic climate.

But he said that the hospitality sector had been heavily hit by the fallout, with redundancies being made, room rates dropping and increased competition in the market, and that it was in for a tough winter this year. The construction industry, a good indicator of how the economy is doing, had seen a lot of projects go up across Hamilton and it would be interesting to see what impact the credit crunch had on the sector as a whole.

The cyclical nature of the economy, argued Mr. Woodward, meant that it was likely to go through a "boom-bust" cycle. Now it was in a downward spiral, following a number of good years enjoyed by the international business and tourism industries.

He said it was crucial to know what is happening with your business and in the local and global economy, to manage working capital, control costs, communicate with employees, focus on core products and to separate business and personal expenses.

Ms Black then continued the theme of sound business methods, ranging from understanding business cash flow by developing a set of forecasts that are not overly aggressive, understanding revenues and what needs to be done to generate a profit and considering expenditure necessary to run the business and minimise unnecessary expenditures.

The event, which also featured an interactive case study, was wrapped up with a panel discussion, evaluations and closing remarks.