Are you worried about the economic downturn?
Some say a recession is coming, while others say it’s already here. And while recession is a scary word for every business, it’s particularly worrisome for small businesses that may not have the same financial cushioning as large companies.
That’s why it’s important to develop a plan to manage the imminent recession. As the economy takes a deeper dive, it will become harder for you to respond in a timely manner and keep your business afloat. And even if you believe your business won’t be effected by recession, it’s always good to review where you are now and how you might be able to improve your business cash flow and profitability.
How can I protect my business against recession?
While there is no guarantee your business will be unscathed, there are 5 areas you can review to improve your business and get it recession ready.
1. Deal with any cashflow problems
Your immediate priority should be to get on top of cashflow. Stop any cash leaks in your business. Look at overdue accounts. Chase up late payments. Review your credit control processes. Is it easy for customers to pay on time? Are you automatically reminding customers about their overdue invoices?
Consider what you’ll do in the worst case scenario. Can you build up a cash reserve to get you through a recession? Do this by focusing on profitable sales, bringing in cash at the earliest opportunity, avoiding unnecessary expenditure, and delaying purchases until you actually need them.
2. Know your numbers
Which are your best performing products and services? Where do you get your recurring income?
All of this information should be available in your accounts to help you identify trends in performance and profits. The sooner you understand the issues and get on top of your numbers, the sooner you can act on them!
3. Focus on what you’re good at
In difficult times there’s no room for under-performing units, products, services or markets. Nor is there space for pet projects. That doesn’t mean you shouldn’t take the opportunities recession presents. Indeed, we expect many people will set up their own businesses and follow their dreams using redundancy payments.
However resilience is key, so focus on your core strengths. Do you have the right people, in the right roles, with the right skillsets? If not, what changes do you need to make to ensure your business is more robust?
4. Streamline and automate your business processes
It’s easy to grow overheads and carry unnecessary costs when times are good. However with recession on the horizon, it’s important to get lean and efficient.
Not sure where to start? Here are some ideas:
- review subscriptions and software costs – are they all still being used?
- replace manual data entry with machine reading / AI technologies
- integrate your business systems to avoid re-keying data
- document your business processes so you’re not reliant solely on employee knowledge (it also makes it easier to induct new recruits, and to sell your business) – not knowing where to start, then why not video your staff taking you through all the important processes?
- switch to drop-shipping arrangements with your suppliers
- make better use of your space – sell on old, slow-moving stock and identify revenue-generation opportunities for unused space (e.g. a trade counter, sub-let storage space or a bookable meeting room)
5. Look after your current customers and also keep marketing
It can be challenging to find new customers, so ensure you have programmes in place to nurture and retain existing customers, as well as make it as easy as possible for any customer/ prospect buy from you. Seek testimonials to include in your marketing. And on that note …
Don’t make the marketing budget the first you cut! It’s vital to continue to bring in new business. Be consistent in your approach. While many individuals and organisations will be cutting back, make sure that when they do decide to spend, they choose your business.
If you’re unsure where to start in your business, ask us about our Business & Xero Review.Business & Xero Review