A recession is coming. Maybe not today. Maybe not tomorrow. But soon.
While it probably won’t last for the rest of your life, a recession is coming. That’s fact. Even though there are warning signs to look for—elevated interest rates, deflation, stock market crashes, lack of confidence in the economy, etc.—there’s no magic formula to predict precisely when it will hit and for how long.
For instance, some speculate the next recession will be sooner rather than later due to rising interest rates and slow first-quarter growth. Maybe it will happen. But then again, who could have predicted the blow the economy would take at the beginning of 2020 when the coronavirus emerged? Best laid plans, right?
But no matter whether it happens this year or five years from now, it never hurts to be prepared.
A survey from a few years ago found that 44% of small-business owners surveyed have not taken any steps to prepare for a possible recession. Knowing the unexpected can pop up at any time, it’s more important than ever to be proactive and prepare your business to survive the next recession. Here are three key areas to focus on.
Take Care Of Your Finances
It all comes down to money. If you don’t have it, you can’t stay afloat.
Build up an emergency fund. Just like you (hopefully) have money tucked away for yourself for a rainy day, your business should also have something saved for the unplanned and the unexpected. Keep cash reserves of at least three months’ worth to cover everything from operating expenses to employee payroll. Quick and easy access to funds is imperative when the economy starts to tank.
Secure capital. Whether it’s through investors, lines of credit, grants or credit cards, go into recession knowing what you have access to. It allows you to plan ahead rather than scrambling trying to play catch-up.
Get up close and personal with your spending habits. Are there ways you can cut costs without sacrificing quality? Can you renegotiate contracts with vendors and suppliers? Identify strategic and nonstrategic spending. Where can you selectively trim costs to improve the return on operating expenses?
Pay down debt—good advice, recession or not. If you have the ability, pay down those high-interest loans or credit cards, so you’re not shelling out those payments month after month.
Market For New Business
Advertising budgets are typically the first thing that gets slashed when businesses face financial hardships. It’s hard to pour time, energy and money into something that doesn’t always have an immediate ROI.
But even in an economic slump, you need to keep your competitive edge in the market. Consumers are spending less, and when they do make a purchase, they’re far more discerning and selective. If you’re not getting your name out there, you have less hope that your business is the one they’ll choose to support.
That’s why you need smart, strategic marketing. Show them why your business is deserving of that honor. Help them understand why your service or product is a wise investment, that it can provide some degree of stability during a turbulent time.
Build Customer Loyalty
Don’t forget your current customers. When worse comes to worst, a loyal customer base can be the one thing that stands between keeping the lights on and shutting the doors. Like this print shop in Georgia discovered. It’s a smart business move to seek out new clients, but it’s equally (if not more important) to keep the ones you already have.
It is often said that it costs more to gain a new customer than keep an old one. If you’re constantly bringing in new clients but losing your regular ones along the way, you’re just taking one step forward and two steps back. That’s not a dance you want to be doing.
Provide excellent customer service. Focus on building loyalty. Don’t reserve the discounts and freebies for new customers you’re trying to attract. Continue to assess and identify their needs and how you can fulfill them. Remind them why they should continue to support you over your competition.
Takeaway: Don’t Wait For A Recession To Prepare For A Recession.
Start planning now so you have a bit more cushion to get you through the inevitable. The inevitable may not be today. Maybe not tomorrow. Maybe—well, you get the picture.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Courtesy-https://www.forbes.com/sites/forbesfinancecouncil/2022/03/29/three-ways-small-business-owners-can-mitigate-risk-during-a-recession/?sh=6fe45068488d