The pains caused by any type of economic downturn can be excruciating, which is why most of us quiver at the thought of it. Just the word recession leaves us with so much uncertainly – it could mean massive layoffs, jobs becoming harder to find, and wages frozen. We start talking about a potential recession, the fear kicks in, and this all contributes to everyone hunkering down and spending less, often unknowingly making the economic slowdown that much worse.
For most businesses, and especially so for small businesses, recessions can be brutal. The battle against COVID-19 is far from over, global financial markets have been impacted, consumers are wary about spending and are tightening their belts all over the world and general demand is falling. All these signs are pointing to one thing: the next economic downturn may just be right around the corner.
Now, we are not trying scare you! Our hope is for you to build a successful business that is future-proof. That means you need to be aware of the potential for recession so you can ensure you are most effectively prepared.
In this blog, we have tips to help you not just survive an economic downturn, but to rise & thrive.
Get in touch with us and we can chat about you and your companies situation.
Stay Close to Your Numbers
Without a clear picture of your business’ financial health, you will not be able to create an effective strategy that will help you take on this major business challenge. By making the effort to understand your financials, including your revenue, expenses, profits, and cashflow numbers, you will be able to plan the future accordingly.
We recommend looking at your cashflow forecast. These forecasts will help you conduct best, moderate, and worst-case scenario planning. Doing this will help you make sound business decisions that are based on updated financial data, rather than being driven by emotion, intuition or just guessing!
Improve Your Cashflow
Cashflow is the lifeblood of your business, and ideally, you should be bringing in more income than the amount you are spending to sustain your business. However, before you can improve your cashflow, you need to first ensure that you have accurate financial records and an effective accounting system in place.
Once you have these sorted out, it will be easier for you understand and to take control of your cash position through:
- Payments from clients– timely invoicing, chasing payments, and offering to restructure overdue payments
- Reducing your expenses by reviewing software subscriptions, renegotiating terms with your suppliers and lenders
- Secure financing from government stimulus funds, take on investors, or get short-term financing. However, if you are thinking about incurring debt during a recession, we would highly recommend consulting with your accountant or financial advisor first.
- Make extra effort in nurturing your relationship with existing customers
- Enhance your products and services
Maintaining, Or Even Better, Growing Your Customer Base
If you want your business to thrive during a recession, you likely need to grow your customer base. One way to do this is by digging deeper into your target market and coming up with ways on how you can tweak your offers to entice them into engaging your services even during tough economic conditions. You should also research your competitors, identify your point of difference and plan how you will communicate those selling points to interested customers.
We understand that getting more clients during a time like this is easier said than done, but what many business owners fail to realize is the fact that their existing customers are often their best opportunity to make more sales. Keep your customers happy, identify how you can add more value into their lives, and reach out to them to take advantage of untapped sales opportunities.
Focus On Your Strengths
The concept of “diversification” is usually taken in the wrong way. Simply adding a host of different products and services to your offerings will not magically transform your business. In fact, it may be a waste of time and resources and stop you from focusing on the things that you do best.
During an economic downturn, you should re-evaluate your existing products or services, and focus on your key strengths or core competencies. If you’re selling physical products, this is also the perfect time to re-evaluate your inventory management and adjust based on the products that you would want to focus on. Don’t ignore the potential of reducing your inventory costs by only ordering the items and the right amount that you need.
Improve Your Marketing Efforts
One of the most common mistakes of business owners is that whenever they need to minimise their expenses, they automatically cut their marketing budget or even re-allocate it entirely.
Marketing and sales go hand-in-hand. So if you want to keep a healthy flow of sales coming in, you need to have strong marketing as well.
In today’s fast-paced world where consumers are restless, and during a recession where they will become even more careful in their buying decisions, marketing is your tool to help them find and see your products and services as the best options in the market. So instead of quitting marketing, now is the right time to step up your marketing efforts.
Don’t be Afraid to Play Offence
Those who go full survival mode and simply limp through the recession will be much slower to recover and have a lower chance of catching up.
Secure your cash reserves and know when is the right time to play offence. Think about ways to innovate your products and services, streamline your operations to boost efficiencies, expand your market share by improving your offerings, and consider other options like mergers and acquisitions.
There is No Fool-Proof Way
There is no specific strategy that will make your business 100% recession-proof, but these tips will definitely make a difference in how well you can navigate through these difficult times.
In the business world, ups and downs are normal and growth stalls due to recurring reasons are inevitable. At the end of the day, thriving in a recession comes down to having exceptional industry expertise, getting better business visibility, implementing efficient processes and best practices, as well as having a business adviser who can provide you with expert guidance, fresh insights, and timely advice.
What’s next for your business? Get in touch with us and we can help you work through how you can rise and thrive and plan for a successful future.