You never quite know when a recession is going to hit and it’s worse if it comes as a shock. As is often the case, small businesses tend to feel the biggest impact, which is why it’s A MUST to recession-proof your business.
A recession is never good news but by having a plan firmly in place, you can set your business up for survival. With all the talk about inflation and a downturn, here are some simple tips to help prepare for the future.
1. Stay On Top of Your Financials
Preparation starts with awareness. You should make it a habit to check your financials regularly (weekly at a minimum). You need to have an accurate knowledge of your financial situation in order to make a feasible plan for a future recession.
It’s a good idea to use a Key Performance Indicator (KPI) system to understand which practices generate the most return and which expenses you can spare. Understanding which costs are most worthwhile will allow you to prune your business when necessary. The fewer financial burdens you have when a recession hits, the better.
2. Minimise Operating Costs
Tempting though it might be to splash out on swanky new office furniture or upgrade your coffee machine, these items aren’t really necessary. In order to prepare for a recession, it’s crucial that you keep costs to a minimum and reduce discretionary spending.
Of course, it’s a balancing act. If you’re overzealous in cutting costs, you’ll damage your own productivity in the process. For example, it’s okay to repair or replace a damaged item in your office, but don’t make frivolous upgrades for aesthetic purposes.
3. Improve Your Credit Score
It’s difficult to secure a loan during a recession and you’ll need an excellent credit score. The problem is that it’s pretty difficult to improve your rating when times are hard. Start working on your credit score now to put yourself in the best possible position should you require a loan to keep your small business afloat. Don’t limit your efforts solely to your business; it’s worth making sure your personal credit score is as high as possible, too.
Here are some straightforward ways to improve your credit score:
- Pay your bills on time
- Reduce existing debts as much as possible
- Regularly check for fraudulent activity
- Only use credit when it’s really necessary
4. Focus on Marketing
Marketing matters more than ever in a recession. You might be tempted to slash your marketing budget, but this mistake could prove fatal for your business. It’s vital to maintain brand awareness and let your customers know that you’re still here to serve them. Don’t let them forget about you. Stay in their minds and they’ll return once their situation improves.
Analyse previous campaigns and weigh up which ones worked best for your business. You may be able to say goodbye to a few practices that aren’t serving you, but be sure to concentrate on what works best for your business.
5. Retention Over Acquisition
During a recession, your existing customers are the most valuable to you. It’s fine to market to new customers but when hard times hit, prioritise customer retention over acquisition. Not only do repeat customers tend to spend more, they also help to drive customer acquisition by recommending your products or services to their friends and family. In short, when times are tough, you need to look after the people who look after you.
After-sales assistance, social media engagement and special discounts are all great ways of taking care of your regulars. Make them feel valued and appreciated, and they’ll keep on coming back.
Preparing for a recession doesn’t have to be complicated. The sooner you take action, the better you’ll be able to safeguard your business. We can’t prevent recessions from happening, so it’s best to be ready for them.
If you need help reviewing your business, whether that’s determining your Key Performance Indicators, assessing profitability, getting clear on your current performance or building a financial plan. The Financial Power Hour will help you clarify:
- What drives your income and costs
- Review Current performance
- Set goals for your business
- Turn those goals into actionable steps.
Visit our services to get booked in today.