As a small-business owner, a recession or downturn can be daunting. However, with the right strategies in place, you can recession-proof your business and emerge stronger from economic downturns. Recessions may present challenges, but as a small business owner, you have the advantage of flexibility and adaptability.
We have created some top tips, you can implement to recession-proof your small business and come out stronger on the other side. You should consider all of the following areas when an ongoing downturn hits.
- Focus on your core business
The past 12 months has delivered an inflationary cycle that has impacted all businesses. Business owners have been looking at areas where they will be most affected by rising costs. If you are looking at your forward planning you need to address some of the following key operational areas of your business:
- Cost of goods and materials – Are there alternative suppliers?
- Does your business have strong brand equity? – How can you leverage this
- Will an upgrade to better or newer software improve your workflow and productivity?
- Can you improve business processes to improve efficiency and reduce costs?
Efficiency and cost reduction are paramount during a recession. Take a close look at your business operations and identify areas where you can streamline processes, automate tasks, or cut expenses. Embrace technology solutions that can help you reduce costs and improve productivity. Consider outsourcing non-essential tasks or hiring freelancers for specialised projects. By optimising your operations, you can create a leaner, more resilient business structure.
- How to protect your business against cash flow problems
Do a cash flow forecast.
You can’t fix a problem if you don’t see it coming. A cash flow forecast allows you to plot inbound and outbound payments on a calendar so you can better predict what will be in the bank at a given time.
You can use software to do it automatically. Businesses with poor cash flow struggle to pay their employees, their suppliers, their utilities and their loans.
Be clear about who owes what.
Keep track of unpaid sales invoices and upcoming bills. If incoming payments begin to slow down, have a chat with your suppliers and lenders about relaxing your payment deadlines.
Review spending.
Controlling costs is another way to protect cash flow but, again, it’s a balancing act. Try to only cut discretionary spending for starters.
Nail down your invoicing process.
Start by getting your invoices out quickly. You’re in for a longer-than-usual wait for payments but that clock doesn’t even start until you’ve sent the bill. Keep track of how long it takes to get paid and act if things start to slip.
Seek payment on overdue invoices and if you start to suffer delays from your customers then seek similar relief from the people you owe.
Give customers flexible payment options.
Accepting online payments can also help. There are also a range of apps that you can use to automatically issue payment reminders when invoices are overdue. Online invoices allow customers to click straight through and pay instantly, which can reduce wait times for the vendor.
Get advice from an accountant or bookkeeper.
It’s important to lean on mentors, accountants and bookkeepers at a time like this. They are great at framing decisions. Accountants and bookkeepers will help you deal with issues in the right order, and they’ll make sure you have the necessary numbers to make smart decisions.
They start by creating accounting reports that show where a business’s financial pressure points are. Then they work with owners and managers to fix those problems. Regular consultations are often handled online, for a flat fee, which prevents cost blow-outs and meeting fatigue.
A regular cycle of reporting and troubleshooting can help you identify and resolve issues faster and will keep you clear-headed about the strategies you’ve chosen.
- Diversify your income streams, customer loyalty and marketing
Relying solely on one source of income can be precarious during a recession. Regardless of the type of business you operate, it is essential to consider diversifying your revenue streams. Explore various opportunities such as partnerships, new product lines, service expansions, strategic alliances, or exploring untapped market segments. By diversifying your sources of income, you can mitigate the impact of a downturn in one area and maintain a steady cash flow for your business.
Build strong customer relationships.
During a recession, customer loyalty becomes even more critical for the survival of your small business. Focus on building strong relationships with your customers by providing exceptional customer service and personalised experiences. Engage with your audience through social media, email marketing, and other communication channels. By nurturing trust and loyalty, you can create a loyal customer base that will continue to support your business during tough times.
Focus on high-value offerings.
In uncertain economic times, consumers become more cautious about their spending. Evaluate your product or service offerings and identify high-value options that cater to the changing needs and priorities of your target audience.
Highlight the unique benefits and value proposition of these offerings to make them more appealing. By focusing on high-value products or services, you can attract customers who are willing to invest in quality, even during a recession.
Optimise your marketing efforts.
During a recession, it’s crucial to make the most of your marketing efforts to reach your target audience effectively. Invest in search engine optimisation (SEO) to improve your website’s visibility in search results. Leverage social media platforms and email marketing to engage with your audience and promote your offerings. By adapting your marketing strategies to the current economic climate, you can maintain a steady flow of traffic and potential customers.
- Stay updated and adapt
The business landscape can change rapidly during a recession. Stay informed about industry trends, market conditions, and consumer behaviour. Monitor your competitors’ strategies and adapt accordingly. Embrace innovation and be open to exploring new opportunities that arise. By staying proactive and agile, you can position your small online business to thrive despite the challenges posed by a recession. Recessions may present challenges, but as a small online business owner, you have the advantage of flexibility and adaptability.
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