Times are good, so start working now to make sure your small business is recession-proof.
The 2008 Recession was a difficult time to be a small business owner. In fact, The Great Recession led to the collapse of many small businesses. That was just 10 years ago, and the economy is strong today. However, You don’t have to do much digging to find countless business headlines claiming an economic downturn is looming on the horizon. Unfortunately, economic downturns are a fact of life when you’re running a business. For the average small business owner, prudent practices can keep things humming along in every economic condition. Here are five tips to help your small business remain viable:
1. Take Care of your Cash Flow
As long as your business exists, you will have expenses. But the harder times get, the harder it can be to keep the cash flowing in. If you want to survive a recession, then you need to work on strengthening cash flow to provide the essential services your company needs for success. To keep your small business healthy, it is essential that cash continues flowing through. However, the reality is that your order volume will drop during a recession, which is just the financial nature of the beast. But what really hurts your business are past due invoices. Before the recession, your company may want to consider absorbing the impact of past due invoices because there are plenty of invoiced sales to go around. When the pace of invoiced sales drop, those past due invoices have slowed cash flow down to a trickle. Your company needs cash to fuel its operations and expenses, and the banks may be no help during a recession either.
If your startup or small business is having trouble getting control of its finances, consider Limitless Investment and Capital’s CFO services for startups. Limitless Investment & Capital provides growing and established organizations with experienced CFO-level talent on an outsourced, part-time basis at a fraction of the cost of a full-time employee (great for cutting costs!). Our CPAs and consultants provide specialized skill sets to navigate times of transition when you can’t afford to be without a CFO.
2. Double check your inventory management process
Evaluate what can be done to reduce inventory costs without sacrificing the quality of goods or inconveniencing customers. Is it possible you are ordering too many of a particular product? Is there a drop-shipping alternative that will work for you, eliminating shipping and warehousing costs? Your small business may also want to evaluate the option of outsourcing if an item can be sourced somewhere else at a better price. Although your small business may feel comfortable with particular vendors or suppliers and its current processes, now is the perfect time to evaluate alternative options that could save you money.
3. Never stop marketing your business
Many small businesses make the mistake of cutting back or completely eliminating their marketing budget during lean times. In fact, it is smart to increase your voice in the midst of a recession. Marketing through a recession means there’s not as much “marketing noise,” so you don’t need to shout as loud for your message to be heard. Additionally, your continued presence during tough financial times will be interpreted by your clients and prospects as a sign of stability, showing you are strong enough to survive the recession and have the leadership to continue to thrive. Reducing your marketing presence also leaves a gap for competitors to take advantage and fill the void.
Your marketing plan should be updated regularly based on the changes in economic conditions. You want to avoid generating resentment while being sensitive to the mood of your potential clients and prospects.
4. Determine what you could stop doing
Be ready to make changes in cost structure that will hone your value proposition down to what customers really value. We suggest combing through your cost structure to create a contingency plan and identify what is inefficient, what’s nice to have but dispensable, what worked in the past but doesn’t anymore, and what isn’t creating value as it used to. It is also important to realize the challenges you would face in cutting these costs. Most organizations aren’t adept at cutting costs quickly as revenues decline and margins suffer.
As your company continues to grow, your operations have probably become more and more complex. Also be ready to cut any complexity that isn’t compliance- required or value-adding. You may want to consider outsourcing non-strategic company functions such as accounting and finance. Outsourcing your accounting department to an accounting firm can be an excellent way to cut costs while receiving high-quality work from experienced accounting professionals. Looking for an accounting firm to outsource your work? Check out Limitless Investment and Capital’s accounting and bookkeeping services.
5. Add value, not price.
If your small business is going to prosper in tough times, you need to continue to expand your customer/client base- and that means drawing in customers from the competition.
It is essential your small business continues to add value to your services in order to get repeat customers and new business through referrals. Adding price without adding value is a lose/lose proposition, and is a quick way to lose clients to the competition.
Limitless Investment and Capital’s Outsourced Accounting Services in Chicago and Denver.
Is your small business prepared for a possible recession? Limitless Investment and Capital’s accounting experts can handle all your bookkeeping and accounting in Denver needs at an extremely affordable rate. Our CPA’s have over 75 years of accounting experience and are committed to tailoring a schedule that fits each client’s specific needs. Our small business bookkeeping services in Denver and Chicago ensure limitless benefits for your company. Need more than just a bookkeeper or an accountant? We also offer CFO services for startups and small businesses! Get in touch today to learn more information.
Hopefully, 2020 will be a banner year for your company. But just in case it isn’t, invest some time now to plan how you will weather a downturn.