Small businesses are at the forefront of ever-changing economic times. Yes, global events, turbulent markets, and financial pressures make running a successful small business a challenge; however, weathering the storm can be mighty rewarding – those who manage to get through a crisis successfully will have an easier time growing afterward.
Although nobody can predict or control when a recession strikes, you can control what you do to prepare, including getting savvier about cash flow, debt, and business operations.
With current inflation levels hovering around 8% and the Federal Reserve Bank raising rates, we are seeing more layoffs and productivity downturns affecting not only the large tech firms but slowly becoming a reality for many small businesses. The after-effects of supply chain management issues caused by the pandemic highlight the need for careful decision-making from small business owners.
It’s up to interpretation and understanding of a recession. The U.S. economy experienced a decline in the first and second quarters of 2022. Early Q3 reports show the economy is growing, so there might not be a looming recession. These financial reports and rising inflation rates can cause confusion and flurry for small business owners and policymakers.
We know that it’s difficult not to get caught up in what’s happening in the news, but you should focus on your business and understand the fundamentals of recessions and inflation and how you can better prepare. For the average small business owner, mindful and strategic preparation can progress your business in every economic condition. Here are 6 Tips to Recession Proof Your Business.
To maintain stability in these uncertain times, working capital becomes increasingly important, as it is the cheapest source of cash and the smartest option before a recession hits.
Having cash resources and other financing options to fall back on is a great way to increase the financial health of your business. However, the uncertain economic times may see nervous banks stiffening their loan requirements. Alternative lenders, such as ByzFunder, are expanding online lending options, making it easier for small business owners to acquire the capital needed to maintain stability.
We can’t say this enough; cash flow is king! Managing your business’s cash flow is crucial during times of uncertainty. Many business stats indicate that small businesses fail because of their diminishing cash flow and inability to reserve and control it properly.
One way to protect your cash flow is to issue invoices and review your receivables on time. Resolve any cash flow issues before it becomes a grander problem.
The hack with financing is maintaining a healthy business debt level, which many small businesses find difficult. Smaller businesses don’t have the same support or deep pockets as larger businesses, which means more caution in accumulating more debt than their pockets can manage.
Not all debt is bad debt. Larger companies take on more debt to grow their operations. But how much debt should a small business have? You shouldn’t have more than 30% of your business capital in credit debt – Lenders assume you may not be profitable or bad at managing money.
Now’s the time to examine your spending habits and see whether you are cost-efficient. Are you ordering excessive quantities of certain items? Could you perhaps buy certain products at better prices from new vendors? While you’re reviewing your receivables, spend time examining your inventory practices. There are many ways to cut costs, so don’t get caught up doing things one way because it’s what you’ve always done. Change is good. Good for you and good for your business expenses.
Nurturing your customers by offering incentives like discounts/rewards to advocate for your business by sharing your emails, social media, or even spreading the word about your business can pay off in times of need. Providing an inclusive experience grants an opportunity to upsell and cross-sell. If you show your customers how much you value them, they’ll keep returning for more.
“Marketing is Queen, and the Queen runs the household.” Regardless of the economy, never stop marketing your business. Getting in front of the right people at the right time on the right platform will set your business up for success. If consumers don’t know about your company, they can’t do business with you. First try to understand your audience and their pain points. A lean market allows you to distinguish yourself from other businesses by emphasizing your superior product or service that caters to that consumer’s need.
Marketing can become costly if you are trying to do too much. Start with a smaller budget, and as your business expands, increase that budget. Many marketing opportunities do not require massive budgets to succeed – mainly social media and video sites. Platforms such as Facebook, Instagram, YouTube, and TikTok offer excellent ways to draw consumer attention without breaking the bank. What’s more, email marketing is seen as the number 1 small business marketing channel. It reaches new customers and offers the opportunity to nurture existing customers and remarket to older ones.
These 6 Tips can help you recession-proof your business. If you need capital to help with recession-proofing, apply for fast, simple, and secure financing with us today: no hassle, no obligation, just lightning-fast same-day funding.