Whether it is a recession or inflation, small businesses are particularly vulnerable as they often don’t have the reserves to help them weather difficult financial times.
As the saying goes, the best time to borrow money is when you don’t need it – when things are going well. There is an iota of truth to this adage.
The same goes for business planning. The best time to prepare for a recession is when things are going well. This strategy allows you to act proactively, instead of reacting to circumstances. It gives you the option to implement sustainable strategies to help ensure your business’s survival.
Here are some of the important areas to pay attention to if you want to counteract the negative effects of difficult financial times on your business;
Cashflow is the lifeblood of any business; to keep your small business healthy, cash needs to continue flowing in.
Improving cash flow can help ease some financial pressure. Find ways to keep the cash flowing, such as using electronic payments, sending out invoices promptly, and quickly following up on late payments from accounts receivable.
Raising your prices can damage your business, and it’s most likely not the first course of action you’ll want to take in the face of inflation, but it does remain an option. If you decide it’s time to raise prices, keep an eye on your competitors’.
MARKETING/ CLIENT ACQUISITION
In lean times, many small businesses make the mistake of cutting their marketing budget to the bone or even eliminating it entirely. But lean times are exactly the times your small business most needs marketing.
Consumers are restless and looking to make changes in their buying decisions. You need to help them find your products and services and choose them rather than others by getting your name out there. So don’t quit marketing. In fact, if possible, step up your marketing efforts.
Diversify your marketing channels and client acquisition sources. Otherwise, you are at the mercy of a single source of clients.
Imagine you get most of your clients by advertising on Facebook or Twitter. What would happen to your business if those Social Media Channels are shut down by the government? Chances are, you would close shop too.
Diversifying your client acquisition channels should be very high on your priority list. Doing these things when times are good gives you the funds and time to experiment until you find the right channels.
Are there any tasks that can become more cost-effective by utilizing a technology that you’re not currently employing? Look for ways where automation can come in and make improvements.
Leave no stone unturned. If possible, outsource non-essential business functions. In many cases, this strategy saves you money. And when recessions hit, outsourced resources are the easiest to trim.
Here’s the golden rule;
Don’t buy something unless your business really needs it.
That doesn’t mean you can’t splurge here and there. You can, as long as you do it in moderation and carefully.
See what can be done to reduce inventory costs without sacrificing the quality of goods or inconveniencing customers. Are you ordering too many of particular items? Can an item be sourced somewhere else at a better price? Is there a drop-shipping alternative that will work for you, eliminating shipping and warehousing costs?
Nothing kills a business sooner than a warehouse full of slow-moving inventory. That’s money sitting on the floor. Implement an inventory management and tracking system early on. This step can be complicated, but it’s usually worth the expense. That way, you can operate more effectively and avoid wasting money.
Implementing these practices will help ensure your small business’s survival and even allow it to thrive during tough economic times.
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