Recession. That word alone can strike fear into the heart of a small business owner. But don’t fear! These strategies will prepare you for financial insecurity.
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Our current economic state is stressful. As the word ” recession ” floats all over the news, it seems we are in a sort of “will we or won’t we?” debate between those who believe a recession is unavoidable, those who think it can be side-stepped and those who feel it could go either way. Given that it’s hard for financial analysts to know what will happen, small business owners have little hope of being able to pinpoint precisely what economic turn the country will take and when. The best option is to prepare our businesses.
Certain businesses are nearly recession-proof just by what they do or sell. These companies meet basic needs: food, clothing, housing, healthcare and utilities. Whether in one of these fields or not, the vital thing to remember is that recession-proofing your business benefits you regardless of whether the recession hits.
So how do you do it? Here are some top moves to make. 1. Diversify
Consider what products you could add to your line-up at a minimal cost . If you’re already making soaps and bath bombs, consider adding products like salt scrubs or body washes. Consider expanding to baby blankets if you specialize in knitted hats for infants.
Think about your market. Is it possible to reach customers in different ways ? Consider selling your products through a large online retailer like Etsy , Amazon or eBay . See if the local grocery store will carry your soaps or if that cute baby boutique will sell your hats. Consider if there are populations of customers you are not currently targeting. Think about how customers access your products. Add delivery, business-to-business sales, bulk pick-up or even subscription services.
Finally, you might be able to diversify your offerings by adding new price points. If you usually make all leather bags and boots, consider offering a similar line in faux-leather options that are more affordable (which might appeal to vegan customers — a whole new market!) If you make sweaters from alpaca wool, consider adding a synthetic version of the same style to catch the customer who loves your look but has a tighter budget . 2. Understand your cash flow
Even if you have an accountant handle your financials, now is the time to sit down with your statements and know your cash flow. Take a look at your documents month by month. Based on your historical spending, you should be able to create a realistic monthly budget. Develop a spending plan, factoring in worst-case scenarios based on what you come up with. Check in on your cash flow every single month and adjust as needed.
As you review your budget , think about the purchases you’re likely to make in the next 18 months (sure, the average recession is only 11, but they can last up to a year and a half.) Consider delaying major expenses like new office space or new furniture. At the same time, review your ad buys and costs and identify which are earning you the most significant returns. Drop any that are not paying off. You must keep investing in your company via advertising , even during a recession. Fading into the background as you try to save money is a surefire way to run into trouble. In addition to reviewing your budget and expenses, take the time to renegotiate with your suppliers, especially if it’s been a while since you’ve done so.
Finally, consider preparing to open a line of credit or apply for a loan. You may never need it, but training the documents you need takes time, so go ahead and collect them now. Ensure you have the most up-to-date financials, business plans , references, organizational charts and resumes. Do prospect research to identify possible grants related to your business or peruse loans with the best interest rates. Keep them in your mind and be prepared to pull the trigger on an application if necessary. 3. Prepare your team
Make sure each team member does the work best suited to their strengths. If someone is underperforming or you realize you don’t need an absolute position to fulfill a specific task, make the edits. If you downsize, be aware that those remaining may fear for their jobs. It is essential to explain the situation carefully, reassure your team of their value […]
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