In economics, recession pertains to two or more consecutive quarter-long temporary economic downturn experienced by a country. It is characterized by a falling gross domestic product (GDP) due to a decline in commercial activities such as working, trading, investing, and spending. It is caused by several factors such as financial, psychological, economic, and health crises. In this article, we will be discussing more on how to recession proof your business and what actions you can take to properly manage.
Recession Proof Your Business
A great example of a deep recession is the one we are experiencing today. Due to the impacts of the COVID-19, we are currently experiencing a severe economic decline that can affect us in the following months. According to NIESR predictions, the economy may fall as much as 5pc from its previous 0.1pc in February.
Unlike people, recessions are impersonal and indiscriminate. It does not cherry-pick an establishment—it affects all of it. Whether you are a small venture or a multi-million company, you are not safe from the dark clutches of an economic downturn.
As with everything, prevention is better than cure. To save your business from a massive slump, here are sharp strategies to ready your enterprise, lessen the pain, and survive an oncoming recession.
1. Focus on your Cash Flow
Cash is what keeps your business going. Despite a recession, money must be kept moving—increasing its inflow (sales or billable services) while trimming down unnecessary expenses. You can do this by reviewing your inventory and cutting costs without compromising product quality. Focus on core products or services that will provide you with the most profit.
One of the best practices in business is a well-placed system that can identify financial troubles early on. Do a number-crunching with your accountant to get a good look at your actual finances. From there, build a reliable financial management system to ensure that your business retains its optimal health.
2. Strengthen Customer Base
This is the time to make the most out of your current customers instead of investing in new clientele. Loyal customers provide more sales opportunities than new ones. To keep them under your market, focus on establishing an excellent customer relationship through good service, keeping promises, and quality products.
Prioritize their needs by giving them the value they deserve; in the process, they will be reminded why they love you in the first place. This, in turn, will help you market your products or services without spending a single penny.
3. Build Revenue Streams
Another way to increase the inflow of money towards your business is by creating new revenue channels. A variety of streams allows you to bring income into your company, regardless of the economic condition.
Establish and invest in both digital and physical products, monthly customer subscriptions, delivery systems, affiliate marketing, and sponsored content. Study the current market to offer new products or services with high demand. Broaden your line-up but stick to the ones that can bring more profit.
Look for functional yet cost-effective ways to increase your revenue. Do not box yourself to traditional systems, be flexible, and adapt to necessary changes.
4. Get the Financing You Need
Before the dwindling cash flow starts, secure your business by getting the financing you need. Weigh your financing options and look for ones with the lowest cost, such as SBA loans, bank loans, and crowdfunding. When a crisis ensues, lenders will enforce tight lending standards to filter out hundreds of companies that will surely apply. Take advantage of this free time to gather documents, settle tax and credit issues, and evaluate your financing options.
Choose to take action now and position your business on the road to success even before the economic decline starts. Keep your firm afloat by enabling recession proof strategies into your system. If you have more questions about how you can make this possible for your business, get in touch with Annette & Co. today!