Recessions are an uncertain time, particularly for small businesses. When inflation is on the rise, small businesses feel its impact the most. Price increases of goods and services, loan interest rates and supply issues can all have a negative impact on running an operation. There are ways to safeguard your business when a recession is looming, to minimize its effects and help keep you in business during tumultuous times. Here are 5 ways to get a head start on the uncertainty of a recession.
Source capital sooner than later. A business cannot function with insufficient working capital and when the future of the economy is uncertain, eased lending by banks begins to tighten. Revise your cash reserves and research financing options that will help you stay afloat.
Controlling your business’ cash flow is always important but it’s critical during times of economic uncertainty. Staying on top of your monthly bookkeeping, generating cash flow statements and analyzing your cash flow will help you find inconsistencies like clients that frequently pay late or owe money. Evaluate overhead costs and cut back unnecessary spending. Avoid pulling money out of reserves, and match business expenses to sales generated. In example, purchase office supplies with money directly from a generated sale.
Analyzing your cash flow will help you understand whether or not a big investment is a smart decision. Things like opening a new office, investing in expensive software or hiring too many people too quickly are all examples of big investments that could backfire if a recession hits.
One expense you should not be quick to cut is your marketing. Things you can do to decrease your budget if needed are things like: evaluate your ROAS and ensure it is above 800%, review your analytics and determine where you can capitalize on reaching your target audience without spending more than you can, like making updates to your website or posting more on social media.
Cross-training staff and finding ways to help build on their current skills can help your business be able to creatively shift and stay flexible during uncertain times. Additionally, investing in staff will allow them to feel more motivated to go above and beyond when needed.
Your existing clients are your most valuable assets to your business. Create a campaign to incentivize them to provide referrals or add to your reviews. Obtaining new business from current clients is a cost-effective way to grow your book of business and significantly cheaper than acquiring new clients.
While recessions can be a scary time for many, having working safeguards in place and staying ahead of the curve can help you and your business ride out the worst of it. A great way to keep abreast and ensure your financials are taken care of properly is by hiring a professional accountant. Greenlight Financial can help you with guidance and strategies to safeguard your business during a recession.