How To Survive An Economic Downturn As A Small Business Owner
An economic downturn is a scary prospect for any business, but even more so for small businesses that don’t have a sizable financial buffer. As a global recession becomes increasingly likely, small businesses need to have strategies in place to avoid the impact.
Small business owners will need to make a recession-proof plan before the worst of it kicks in. If the last two years have taught us anything, it’s that we should always be prepared for what’s around the corner. You never know when you’ll need to implement your financial survival plan.
A recession is coming, but it doesn’t have to spell disaster. There are plenty of ways to weather the storm of the impending recession and prosper during an economic downturn.
Plan now and come out the other side unscathed. Here’s how.
Fine-tune your cash flow
Recession or not, cash flow is the backbone of a small business. Optimising cash flow should be a priority regardless of the economy. Unfortunately, it’s not until we face hardship that we fine-tune our incomings and outgoings.
Here’s how you can cushion the blow to your cash flow.
Cut unnecessary spending
Always start with your expenses. Is there anything your business can realistically function without? From unused memberships to overestimated resources, there are many areas where you could be losing precious cash flow.
Search for cost-effective alternatives
Once you’ve cut unnecessary outgoings, shop around for more cost-effective alternatives for the necessary expenses left on your list. Try negotiating with suppliers and find cheaper alternatives to fixed resources. Every bit counts when it comes to protecting cash flow during tough times.
Apply for government assistance
Governments worldwide have seen the pandemic’s impact on businesses and responded accordingly. There’s a range of different support options, including tax breaks, loan schemes and wage top-ups. Check your government’s support schemes and apply for assistance where applicable.
Seek support from your accountant
If you thought about cutting costs in the accounting department, think again. You’ll need your accountant more than ever during a recession.
A supportive accountant will not simply help you survive; they’ll also help you thrive. With a wealth of financial knowledge, your accountant will identify your business’s revenue drivers, reduce your tax burden, and forecast your short-term and long-term financial position. All in all, your accountant will help you come out of the recession on top.
If your accountant can’t offer invaluable business advice, now is a good time to shop around for one that does. Firms like Wilson Pateras and Ingham Mora make it super easy to make the switch. Managing your books is one thing, but it’s quite another to help your business grow during an economic downturn.
If there’s an opportunity for growth, your accountant will find it. Keep them close.
Avoid new debt
It may seem like an obvious measure, but we’re all vulnerable to debt when facing a financial struggle. The more debt you have, the more revenue you’ll lose to repayments.
It’s common to have debt as a small business owner. As the saying goes, it takes money to make money. But taking on new debt in the face of recession can make your financial situation even more challenging.
Offload as much high-interest debt as possible while the economy is relatively stable. Interest rates fluctuate with the economy, so you could end up paying more during a downturn. We’re fortunate to have some time up our sleeve to get as many of our finances in order. If you have debt hanging over your head, it’s essential to cut as much of it back as possible.
Make digital marketing your primary method
It’s common for small businesses to become overzealous with cost-cutting during tough times. Marketing is often the first thing to be scrapped.
There’s no doubt about it; you’ll need marketing during a recession. Without it, your revenue will plateau. Rather than cut your marketing completely, focus your efforts on digital marketing. A digital campaign will slash your marketing expenses while achieving a dramatic increase in customer reach and revenue.
We’ve seen a massive shift in consumer behaviour over the last two years, with more people turning to the internet to find the products and services they need. Whether making a purchase or researching a company, most customers seek information via search engines. If this is where your customers are, this is where you need to be, too.
While there’s still a place for traditional marketing (print, radio and TV), prioritising digital marketing will do wonders for outsmarting your competitors and retaining cash flow.
Do your marketing differently and receive a greater return on investment.
Seek new opportunities
Consumer behaviours evolve alongside a fluctuating economy. When the economy trends upward, consumers spend more on luxuries. When the economy trends downward, consumers focus on necessities.
There are opportunities for growth no matter what the economy is doing. The key is to stay in tune with customer trends and adapt accordingly.
Things are currently trending downward, so seek opportunities to diversify your product or service portfolio and meet your customer’s needs. Many businesses created new ventures to expand their market share during the pandemic. For example, fashion outlets designed stylish face masks, distilleries produced hand sanitiser, eateries provided a contactless service, in-person seminars became online webinars – to name a few.
There are opportunities in every economic climate; you just have to dig a little deeper to find them during a recession. As long as you give your customers what they need, you’re set up for success.
Be proactive and come out the other side
Small businesses have had to bear the brunt of financial hardship during the pandemic, and the impending recession is yet another hurdle to overcome.
If you’ve made it this far, your business has all the right qualities to thrive during an economic downturn.
The key is to be proactive, not reactive. Reactive decision-making can lead your business down a detrimental path. We have time to prepare. Start making changes now and create an agile business, ready for anything that comes along.
