Whether predicted or taking the business sector by surprise, recessions are a difficult time for most businesses to endure.
Financial downturns can quickly push a business to the brink of bankruptcy or beyond. Recessions, a global pandemic, significant global conflicts and many more events can contribute to such business stress. So, what steps can strengthen your business and improve its chances of weathering such crises?
Constant Monitoring Of Your Financials
Knowing where your business is from a financial point of view is important at any time. Yet, when things are frantically busy, this is something that often gets thrown on the back burner. A strong business requires constant, regular monitoring of its financials by a competent bookkeeper and accountant. This is a vital step, not just in understanding your business’s financial strength but also in financial prediction. Predicting and planning to keep your business robust in the event of recessions.
Having a constant and accurate overview in this manner allows you to better employ other strategies better. Key Performance Indicators (KPI) to get the most from your staff and limit financial losses from downtime, for example. Constantly monitoring your business financials allows for proactive cost-cutting measures, reducing losses from things like unproductive time and poor purchasing, and ultimately preparing for economic hardship.
Put Your Costs Under The Microscope
Does it forward your business progress? Is there a return on investment associated with this cost? Is fixing a damaged item a viable option? Applying this thinking to every cost in your business helps reduce unnecessary expenditure.
A new tool to replace an older one may or may not be a sound decision. Aside from safety or compliance with regulations that may dictate the need, will buying the new tool make you money? If factors such as safety and compliance aren’t in the equation, then is a shiny new tool even needed? It may not be a tool, but an office lounge or even a new work vehicle. If it will not forward your business progress and increase your income, then maybe the money is better off spent elsewhere or saved. Your business expenses and costs undermine your business profits every week. The more you can limit those costs weekly, the better your bottom line looks annually.
You will need to take many factors into account with every cost-cutting decision. As mentioned, safety and compliance are a couple of examples. However, you can add productivity, staff morale, status, credibility and other factors to consider. Sometimes, spending the money and generating another cost just needs to happen, yet, if you can limit those costs that aren’t necessary or making you money, you can better prepare for recessions and hard times.
Financial Buffer
If you’ve effectively eliminated unnecessary spending and limiting losses, you may be able to put a little away for hard times like recessions. Having some funds aside to call on during recessions or similar can make a tremendous difference to your business survival rate. By creating this buffer during good times, you’ll put yourself in a better position financially to weather the storm and keep your head above water during tough times. Being able to maintain vital marketing, as an example, could be the element that sees you survive when your competitors do not.
Marketing
Whether in a recession or when other difficult times hit your business income, most business owners instinctively go looking for ways to cut unnecessary costs. As we mentioned above, hopefully, you’ve already been doing this and are in a better position financially than you otherwise would have been. However, this is where many business owners look at their marketing plans and often completely suspend them. This is often a big mistake.
During times of financial downturn, you are fighting even harder to remain a viable option for your customers. Standing out from your competitors is more important than ever and a strong marketing campaign can make that difference. Especially when your customers are also struggling and questioning every dollar they spend. Marketing can help you to show your value to them and keep your business foremost in their minds. You want your business the first they think of when they need products or services your business offers. Stay aware of what marketing was effective so you have your go-to campaigns ready to go when you need them.
If you follow our first two suggestions above, you’ll hopefully be able to tap into your financial buffer and continue your marketing and give your business a better chance of survival.
Retaining Clients Rather Than Acquiring New
Holding on to the customers and clients you have can be a constant effort during good times, but it gets much more difficult during hard times, such as during recessions. Acquiring new customers and clients can be even harder. Focusing your priority on keeping your existing customers is a powerful move. While attracting new clients is important, focus your time and budget on keeping your existing customer base happy and loyal. Existing customers typically make larger purchases and are more likely to recommend your business.
Look for ways to extend your value to your customers if you don’t already. Fit those seat covers or take those groceries out to the old lady’s car for her. Look for ways to lift your after-sales services where possible and applicable. Offering free service, a phone call or email checking if the customer is happy with the product or service after some time, for instance.
Engagement with social media is another excellent strategy. Acknowledging somebody’s comment with a ‘Like’ or quick response/comment makes them feel more important. Highlighting customers’ purchases (with their permission) may be another way to strengthen the bond you have with existing customers. Doing so may encourage new ones, too.
It’s all about consolidating your relationships. Do this by adding value to the customer where you can and making them feel appreciated and a valuable part of your business. While this is best practice, regardless of the economic climate, people are often too occupied to prioritise it during periods of growth. Maybe ask yourself if the extra effort in good times is more valuable than you might otherwise consider. If your customer relationships are strong when recessions or similar hit, you’ll have much less work to do to repair those relationships and keep existing customers.
In Conclusion
Therefore, all said and done, being prepared for recessions or other long-term financial hurdles starts well before the hard time starts. Being prepared and already competent in these areas of your business will give you a stronger chance of being around when the good times return.