Believe it or not, you can actually thrive in a recession.
The pains caused by a recession can be excruciating, which is why most of us dread the thought of it.
A recession can mean massive layoffs, jobs becoming harder to find, and wages frozen, which means consumers hunker down and spend less– often worsening the economic slowdown unknowingly.
For most businesses, especially small businesses, recessions can be brutal. Just take for example, the Global Financial Crisis (GFC) that struck the world in 2008. Between December 2008 and December 2010, approximately 1.8 million small businesses shut down.
And now, as the battle against COVID-19 rumbles on in the background, global financial markets have been impacted, consumers are tightening their belts, and general demand is falling. All these signs are pointing to one thing: the next economic downturn may just be right around the corner.
Don’t get us wrong, we are not here to scare you. Our hope is for you to build a successful, future-proof business. That means you need to be aware of the possibility of another recession so you can prepare effectively.
In this article, we have tips to help you thrive in a recession, not just survive. And feel free to get in touch with us to talk through your specific situation.
Stay Close to Your Numbers
Without a crystal clear picture of your business’ financial health, you will not be able to create an effective strategy that will help you weather any business challenge, including a recession. By making the effort to understand your financials, including your revenue, expenses, profits, and cashflow numbers, you will be able to plan accordingly.
Check in with us and we’ll help you review your cashflow forecasts. 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 must 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 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 financial team first.
Make extra effort in nurturing your relationship with existing customers
Enhance your products and services to delve deeper with your current clientele. They already love you and would like to do more with you, so explore ways to improve the client/customer experience.
Once you wow them, they will become raving fans that become ambassadors for your business. Then they’ll start marketing for you. Which leads to…
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 on your target market and coming up with ways on how you can tweak your offers to entice them into buying from you 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 realise 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, and help your business thrive in a recession, you need to have strong marketing as well.
In today’s fast-paced world where consumers are restless, during a recession 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. But be sure to be very clear on the metrics around your marketing efforts. Are they being effective? Are they getting the required return on investment? Know your numbers!
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, and expand your market share by improving your offerings to be 10 times better than your competition.
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 cyclical reasons are inevitable. At the end of the day, thriving in a recession boils down to having exceptional industry expertise, getting better business visibility, and implementing efficient processes and best practices.
It is also helpful to have a business advisor who can provide you with expert guidance, fresh insights, and timely advice.
But Having Cash Makes it Easier
Having cash on hand has always proven to be one of the main factors that determines a business owner’s capacity to deal with the challenges they face.
And what we’ve found over the years, through challenges such as, the Covid pandemic, natural disasters, economic downturns is that businesses who have implemented Profit First have fared far better than those that haven’t implemented it.
While not being immune to the challenges, they’ve had more cash on hand that has meant they haven’t gone into a panic at the first signs of trouble. They’ve had time to assess the challenges and come up with a clear plan of action. Leaving them in a position to then take advantage of opportunities that others can’t due to their poor cashflow.
If you want help setting your business up to thrive in a recession, book in a Biz Fit call today and we can discuss a plan.