Today, we will discuss making your business recession proof. While we may be in the midst of the longest bull run in American history, one would do well to remember that all good things must come to an end. Even the most optimistic among us would be worried by the troubling signs on the horizon.
An economy in freefall could mean a death sentence for any burgeoning business. However, by taking the appropriate steps, it is possible for a well-prepared entrepreneur to weather the harshest storm and emerge victoriously.
With all of that in mind, we now take a look at some of the steps that you can take to recession proof your business.
1. Have A War Chest
Doubtless, to say, cash is indeed king, and this is even more so in the midst of a recession.
During leaner economic times, one can expect cash flows to stagnate as collections decrease and vendors begin demanding payment. For the unprepared, this could be the end of the line.
This is why it’s essential for a business to have a reserve of cash or war chest ready on hand. Whether it’s keeping the lights on or making payments to suppliers, liquidity is vital to the survival of any business.
Set aside a percentage of cash every month to be stored in an emergency fund. While the amount may seem negligible at first, it can make the difference between insolvency and the survival of your business.
2. Tighten Up Collections
Conducting business and closing deals with customers is all well and good but is essentially worthless if all that revenue goes uncollected. Oftentimes, business owners get too caught up in the chase to obtain new customers while at the same time neglecting payment collections.
Consider hiring a dedicated employee to keep track of your business’s accounts receivable or invest in accounting software which allows you to follow up on any uncollected payments.
Remember: in the midst of a recession, every single cent count.
Reach out to your customers and explain your predicament to them. Oftentimes, being upfront with your customers goes a long way.
3. Slash Expenses
Keeping your operating running as lean as possible is crucial if you are to weather a recession and keeping costs low is one of the best ways of doing so.
This can range from moving to a smaller workspace or switching to a less expensive internet plan. Perform an audit of your company’s existing assets and consider liquidating assets that are no longer in use i.e. unused computers or vehicles.
You should, however, exercise caution when cutting expenditures related to employee morale. As can be seen here, some cost-cutting measures only serve to anger and demoralize employees which incurs additional costs down the line.
4. Invest in Marketing
In the midst of a recession, most companies will typically choose to retreat inwards and batten down the hatches. Contrary to popular belief, recessions are in fact the perfect opportunity to net new customers.
While your competitors may be pulling back, reaffirming your market presence allows your business to grow whilst attracting new customers.
Take the story of Domino’s Pizza as an example; in the midst of the 2009 economic meltdown, the pizza giant chose to double down on their marketing efforts and reinvent themselves.
Domino’s tackled customer complaints head-on and turned the entire exercise into a marketing opportunity. Instead of retreating, the company chose to be as transparent as possible about their efforts to improve which allowed them to garner significant public interest.
As a result, Domino was able to both attract new customers and engage with existing ones which allowed them to improve revenues in a time of great instability.
An economic downturn does not necessarily spell the end for your business, just like because a horse had a bad result, it does not mean it can’t be the next Kentucky Derby winner. By keeping a strict hold on your fundamentals and remaining vigilant, even the humblest of businesses can ride out the roughest storm.