Q: Business has been slow for the past six months, and I'm still not sure when things will turn around. Should I cut my employees' salaries or lay off staff? My three employees have been with me for a long time, but I don't know how much longer I can afford to keep them on the payroll.

A: Laying off staff--especially if they're good, loyal workers who've helped you build your business--is one of the toughest decisions any entrepreneur must face. It's one thing for a Fortune 500 conglomerate to cut thousands of jobs at a clip. It's quite another for you as a small-business owner to fire the people who've become your extended family.

That's why it's important to think through all the ramifications before you make a decision that you may regret. Arleen Kahn, a New York City cost-cutting expert and outsourced purchasing manager, suggests giving your employees a choice--lower pay or fewer hours--before downsizing your payroll.

"There are many employees, often women, who would relish the thought of being home with their children or having an extra day to do chores or something for themselves without the threat of losing their job," Kahn says. "There are many men who would also accept this offer, I'd bet."

Once business picks up again, you can put your people back on full-time schedules without losing valuable employees you've spent years training. "Remember, training someone new can be a huge expense, both financially and efficiency-wise," Kahn says. "All the savings from pay cuts go out the window once you add in this new expense."

Note: If you're thinking about temporarily cutting back your employees' hours to survive the recession, you should check to see if your state offers what's known as a "shared work" program. In New York state, for example, an employee earning $400 a week might receive an unemployment benefit of $200 if his employer laid him off completely. However, if his wages and hours were reduced by only 20 percent (the equivalent of one eight-hour work day), the employee would receive $320 a week in wages from his employer (an $80 pay cut) and $40 in shared work benefits (20 percent of $200) from New York state. Programs like these can be a win for the employee and business owner alike.