Everyone is saying a recession is approaching, with increasing pandemics and social disruption, it definitely is about to hit the global economy. But that doesn’t mean you have to shut shop. There are ways to protect your business in the lows of economic fallout.
A recession doesn’t mean all SMEs go bankrupt. In fact, according to federal data in the US, only 170,000 small businesses out of almost seven million shut shop during the 2008 recession. Although the rest weren’t exactly flourishing, they managed to survive for another ten years. While some of the businesses actually made huge sums of profit others managed to get a better understanding of what to do during a recession. But before we dive into all that, we must understand what an economic recession is. Well, an economic recession is simply defined as two continuous financial quarters of negative economic growth followed by a stock market crash and widespread unemployment, and further followed by a crunch in consumer spending, and bank defaults. And the one that worries SMEs: an increase in bankruptcies. But it is not a norm, and there are ways to withstand another Great Recession.
Here are a few measures that will help you tide over difficult times.
Financial expense tracking and analysis
If you don’t have an expense tracking and financial strategy already in place, its time you get one. The first thing that stops during a recession is your cash flow. If you don’t have an expense tracking system that automatically sums up your expenses on a daily basis, there is a high chance you will miss out on reading the red flags early on. A recession is a gradual and then explosive economic shift. And if you only look at your budget during the tax season, you wouldn’t know how to make good cuts when a financial crisis comes knocking your door. This will also improve your spending habit and make sure you are not wasting money.
Good employees make a great business
The people making your sales on a daily basis are your biggest asset. They are working towards your success, and its best to not ignore them. These very people can make sure your business survives no matter what because they have a vested interest. Hence, you should make sure they are well trained and really a part of your team. The first thing employers start doing when a recession hits is fire employees who don’t contribute, that is silly because you hired such people in the first place. Therefore, you need to have a talented lot as your team, not average people with a degree, but talented and motivated people. The point is, your employees make your business, you should take care of them, and have a recession salary cut agreement with them, so you don’t lose the most valuable asset. And train them effectively so they can sail through the recession with you.
A solid marketing strategy
The most underrated aspect of a good business is the friendships you create. If you have a solid relationship with your client, they are likely to not drop you when times are tough. And the best way to build a relationship is through a good marketing strategy. Get to know your clients, and make them understand your ethics and values as a business through marketing channels. This may mean nothing when you have loads of clients but when your clients are making budget cuts, this will play a very big role in determining what they hold back and what they let go. It is also, therefore, important that you are flexible with payments. Even if a client is willing to retain your service during a recession, they might not be able to pay you upfront. You can set up installment system for the said clients.
Also Read: Recession-Busting Tips for Small Businesses
It is almost impossible to make a business 100% recession-proof, but by adopting these measures, you can ensure your business’ survival during tough times.