Economic downturns can be brutal– this is especially true for small businesses with limited resources.
During the 2008 Global Financial Crisis that struck the entire world, approximately 1.8 million small businesses were left with no other choice but to shut down between December 2008 and December 2010. When Investopedia assessed the impact of the financial crisis on small businesses after one decade, it was shown that business creation has not yet recovered to pre-crisis levels.
Ever since our battle against the COVID-19 pandemic has started, nations have spiralled down into recession, financial markets have taken a hit, and consumers have been more conscious in their spending. While vaccination efforts are being ramped up all over the world, the path to recovery is a tough and long journey.
But don’t get us wrong, we’re not saying all these things to scare you. On the contrary, this article is our attempt to help you future-proof your small business. This means that the tips that will be shared here will help you survive or even thrive not only the current economic downturn we’re experiencing, but also the future ones.
Stay on Top of Your Finances
In order to develop a solid strategy that will help you bounce back and surpass all business challenges, you need to have a crystal clear view of your financial health. You need to keep track of your numbers and understand what they mean. Don’t base your decision on gut feeling, instincts, or emotions.
If you don’t know where to start, don’t worry! A reliable accountant can help you take a deep dive into your revenue, expenses, profits, and cash flow. You know you’re working with a good accounting firm if they are more than just number crunchers and can provide valuable, timely advice and help you plan accordingly.
If you need help with your books, budgeting, and forecasts, check in with our team at Lear & Pannepacker and we’ll help you plan for best, moderate, and worst-case scenarios. Stop guessing! We cannot emphasize enough the importance of updated financial data in making sound business decisions that can impact your bottom line.
Consider Artificial Intelligence Technology
Artificial intelligence has the potential to make a tremendous difference in the way we go about our work, offering major benefits which may help boost businesses in hard times. Benefits include enabling you to save time and money by automating and optimising routine processes and tasks, increasing productivity and operational efficiencies, allowing you to make faster business decisions based on cognitive technologies, and helping you to avoid mistakes and ‘human error’ which could otherwise put your business in further jeopardy. AI might not be right for every industry, but companies like Industrial Vision Systems can help you discover what might work best for you and your new business.
Boost Your Cash Flow
For any small business, regardless of your industry or location, cash flow is your lifeblood. Ideally, of course, you are bringing in more income than the amount you’re spending to keep your doors open.
The first step here is to ensure that you have an accurate record of your finances and an efficient accounting system and process in place. Once you’ve managed to sort this out, you can start getting a good grip of your cash position.
Below are some of the ways you can improve your cash flow:
- Timely invoicing, chase payments for overdue invoices, offering to restructure overdue payments
- Reviewing your expenses and cutting back where you can without compromising the quality of your services. Check your software subscriptions or renegotiate terms with your suppliers.
- Take advantage of government support schemes for small businesses, take on investors, or secure short-term financing. If you’re considering incurring some debt, it is highly recommended to work closely with your trusted accountant and seek expert advice.
- Nurture your existing client relationships.
Focus on the Things You Do Best
You’ve probably heard the saying “Don’t pull all your eggs in one basket.” However, many small business owners take “diversification” the wrong way.
You can’t just add a ton of different products and services and expect your business to magically boom. In fact, when not done right and with careful consideration, this can even be a waste of time and resources. It can also distract you from doing what you do best.
During challenging times, you need to carefully evaluate your existing offerings and identify your key strengths and core products or services. If you’re selling physical products, check your inventory management and decide which products you’d like to focus on. Because this means that you’ll only be ordering the right items and quantity, this can potentially help you save a lot from inventory costs.
Grow Your Customer Base
If you want your business to survive the economic slump, you need to at least maintain your existing customer base. If you want to thrive, you need to push harder and strive to increase your customers.
Start by looking deep into your target market and find ways to tweak your offerings to attract more customers. Research about your competitors and spot the point of difference. If you understand your own business and your competitors well enough, you’ll know how to communicate your selling points to your target market.
We know how challenging it is to get more people to buy from you at a time like this. However, what many small business owners don’t realize is that their existing clients offer the best opportunity to make more sales. By keeping your existing customers happy and successfully showing how you can add greater value into their lives, you can tap into fresh opportunities or upsell to them.
Final Thoughts
The economy and the business world operate in cycles. This means ups and downs are normal.
Many small business owners hunker down during economic downturns, as if waiting for the storm to pass. But we say, don’t just limp through these tough times– you’ll only recover more slowly and might even fail to catch up when you do.
So secure your cash reserves, work with your accountant, and find the perfect timing to play offense. Take action in improving your offerings, streamlining your processes to make your business more efficient, and growing your market share.
However, it’s important to note that there’s no single magic formula or fool-proof way to make your business thrive during an economic decline. So if you need more tailored advice and valuable insights, get in touch with Lear & Pannepacker today so you can discuss your specific situation and work out a strategy.
