How To Recession-Proof Your Business
Business owners have been faced with seemingly endless challenges in the past few years. Shipping delays, labor shortages, and supply chain issues have forced many business owners to get creative in order to keep their businesses afloat.
Lingering economic problems caused by the coronavirus pandemic and other international issues have added yet another layer of complexity to the mix, and business owners are scrambling to adapt. Many are wondering how they can recession-proof their businesses and protect themselves from the economic downturn.
There is no one-size-fits-all solution to recession-proofing your business, but there are some steps you can take to help weather the storm.
Surviving the Economic Storm
Small businesses are often especially affected by recessions, as they have limited resources and are more likely to have customers who are cutting back on spending. Take the following steps to prepare for the rough road ahead:
- Prioritize your current customers – Talk to your current customers and find out what they need and want. This valuable feedback can help you adjust your product or service offerings to better meet the needs of your target market. Furthermore, it is often easier and more cost-effective to upsell to current customers than to acquire new customers. It is also important that existing customers feel valued and appreciated. Offering special discounts and perks to loyal customers can go a long way to retaining those customers during a recession. Satisfied customers also act as ambassadors for your company and can help you draw in new customers.
- Manage your business’s cash flow – One of the most important things you can do to recession-proof your business is to understand and properly manage your cash flow. One study found that a surprising 82 percent of businesses fail because of cash flow mismanagement. Make sure you have a solid understanding of your incoming and outgoing cash flow, and take steps to optimize it.
- Cut costs where you can – Take a close look at your expenses and see where you can cut costs. This may include negotiating with suppliers, downsizing your office space, or identifying areas where you can make small, but consequential cuts. Every little bit helps, and cutting costs can give you some much-needed breathing room.
- Be cautious about debt – In tough economic times, it can be tempting to turn to debt in order to keep your business afloat. However, this can be a risky proposition, and you should be very cautious about taking on debt. If you do decide to borrow money, make sure you have a solid plan for repaying the loan.
- Ensure your inventory management is as cost-effective as possible – Are you ordering disproportionate quantities of certain items? Do other vendors offer the same or similar products at lower prices? Are there ways that you can save money by optimizing your inventory practices?
- Focus on your strengths – For most businesses, a recession is not the right time to take risks or venture into new sectors. Focus on mastery and optimization of your core competencies to build on your company’s existing strengths.
Call Us for Help
Recessions hit small and medium-sized businesses especially hard. The Naperville business law attorneys at the Gierach Law Firm is here to help you weather the storm. We offer a variety of services, including outsourced general counsel services for businesses that need legal support and guidance without committing to a full-time, in-house lawyer. Call us at (630) 756-1160 to find out how we can help you.
Please note: These blogs have been created over a period of time and laws and information can change. For the most current information on a topic you are interested in please seek proper legal counsel.