As a small business owner, economic recessions can be a daunting challenge. Whether you’re running a mail-order business or managing a local store with a small team, it’s essential to have a strategy in place to keep your business alive during tough times.
In this article, we’ll provide you with some survival tips to help your small business stay afloat during an economic downturn.
Protect Yourself from Impulsive Spending
One of the most important survival tips for small businesses during economic recessions is to avoid making expenditures on sudden impulse.
As a business owner, you may have made purchases in the past that you didn’t need simply because you were in the mood or influenced by an advertisement or a persuasive salesperson.
To avoid this, always take a step back and evaluate whether the item or service you are considering is essential for your business’s success.
Focus on Essential Expenses
When the cash flow in your business starts to tighten up, it’s crucial to focus on essential expenses only. Cut out any unnecessary expenses that aren’t essential for your business’s operations.
Prioritize the expenses that contribute directly to generating revenue and retaining customers. For instance, you may consider trimming down your marketing budget or suspending non-essential projects until your cash flow improves.
Increase Your Online Presence
Another survival tip for small businesses during an economic recession is to increase your online presence. With more people turning to online shopping, having a strong online presence can help you attract new customers and retain existing ones.
Ensure that your website is easy to use for visitors and has been optimized to rank well in search engine results. Consider offering online discounts or promotions to incentivize customers to buy from you.
Improve Your Customer Service
During tough economic times, customer loyalty becomes crucial. Providing excellent customer service can set your business apart from the competition and build long-term customer relationships.
Take the time to train your employees to provide outstanding customer service. Respond to customer inquiries promptly, and go above and beyond to make your customers feel valued.
Diversify Your Revenue Streams
Lastly, consider diversifying your revenue streams to help your business weather economic recessions. This could include expanding your product or service offerings, exploring new markets, or even partnering with other businesses to cross-promote each other’s products.
Diversifying your revenue streams can help you reduce your reliance on a single revenue source and create new opportunities for growth.
HOW TO AVOID IMPULSE PURCHASES IN YOUR BUSINESS
As a business owner, it can be tempting to make impulse purchases that seem like a good idea at the time but end up costing your company money in the long run. Fortunately, there are steps you can take to avoid these types of purchases and ensure that all buying decisions are carefully considered.
Include a Clause in Your By-Laws
If your business is incorporated, you can add a clause to your by-laws that requires all purchasing decisions over a certain amount to be approved by the board of directors. This will force you to think twice about any significant purchases and ensure that they are in line with your company’s goals and budget.
Make Purchases Contingent upon Approval
If your business is a partnership, you can make all purchases contingent upon the approval of a third party. This third party can be your partner, a department head, or even a supplier. This will ensure that all purchases are carefully considered and aligned with your business goals.
Take Time to Consider Purchases
As the owner of a sole proprietorship, you have the advantage of having three days to contemplate a purchase before making a definitive choice. This enables you to carefully consider whether the acquisition is essential and whether it fits within your budget.
Invest in Professional Services
While it can be tempting to cut corners and save money by doing everything yourself, it’s important not to short-change yourself on professional services. Seeking out the advice of experienced professionals can help you avoid costly mistakes and ensure that your business is on the right track.
Let’s delve into the two essential strategies in more detail:
I. Financial Strategies for Business Downturns
When your business is going through a downturn, implementing sound financial strategies is essential to prevent potential financial crises. Here are some practical financial strategies to adopt during tough times:
Cut non-essential expenses:
Trim down any non-essential expenses that aren’t vital to keep your business running. Some expenses you can consider reducing include advertising, travel, and other discretionary expenses.
Review your pricing strategy:
Revisit your pricing strategy and make necessary adjustments. Consider lowering your prices to attract more customers during tough times, but ensure that you’re still making a profit.
Conduct a financial audit:
As previously mentioned, hire an external accountant or accounting firm to conduct a financial audit. This review can help you identify potential financial problems before they become apparent and give you insight into your return on investment, accounts receivable, and inventory turnover.
Establish a budget:
Create a budget that covers all your essential expenses, including salaries, rent, utilities, and other overhead costs. This budget will help you monitor your cash flow and make informed decisions about your finances.
II. Advisory Boards: Your Company’s Backbone
Advisory boards are a critical component of any successful business, and they can provide guidance during tough times. Here are some benefits of setting up an advisory board:
Advisory boards provide objective advice from professionals in different fields. This advice can help you make better-informed decisions that will benefit your business in the long run.
Access to a broader network:
An advisory board brings together professionals from different fields, which can provide your business access to a broader network of people and resources.
Your advisory board members will come from different backgrounds, and this can bring diverse perspectives and fresh ideas to the table.
Having an advisory board can increase your company’s credibility and demonstrate that you’re committed to excellence.
In conclusion, during a business downturn, it’s essential to be strategic in your financial decision-making. Cutting down non-essential expenses, reviewing your pricing strategy, and conducting a financial audit are all effective financial strategies.
Additionally, setting up an advisory board can provide you with objective advice, access to a broader network, diverse perspectives, and increased credibility.