How to Set Your Business Up for Success Ahead of a Possible Recession
As rumblings about a possible recession continue almost daily, economic doubt and uncertainty weigh hard on business owners. They worry about staying profitable, affording inventory, and keeping their staff employed. Yet, they have to keep serving their customers.
Business owners don’t have to wait for the proverbial sky to fall. The economy routinely goes through ups and downs, and savvy business owners plan for upswings with record sales, followed by downturns where belts tighten.
In this post, we’ll talk about how you can prepare your business for a possible recession.
Tips to Prepare Your Business for Recession Concerns
A recession is a widespread, significant economic downturn that could last six months. Safeguarding your business during an extended period of recession requires adequate preparation. The good news is that many companies have survived and thrived during challenging times by planning ahead and being willing to make changes as needed.
Assess Your Business’s Financial Health
The first thing you should do is assess your business’s current financial health. It can be easy for business owners to assume everything is okay when the economy is booming and sales are plentiful. Though this practice should be part of a routine periodic financial review, business owners should approach it more critically when preparing for a possible recession. You want to look for potential weak points you can shore up and risks that you can put a mitigation plan in place for preventing or responding to issues.
There are some things you can do in advance that will position your business to weather the storm, such as:
• Pay down as much outstanding debt as you can, starting with the ones with the highest interest rates.
• Put more cash into your reserve fund.
• Cut unnecessary costs.
• Pay close attention to collecting receivables.
• Assess your investments and risk tolerance to see if you need to switch to a more conservative or defensive strategy to safeguard against market volatility.
Create a Response Plan
Identifying your risks is the easy part. The real work comes in planning your response. Though it can be sobering to address the possible pitfalls based on your current financial health, creating a response plan well in advance will give you an idea of where to scale back in worst-case scenarios. It can alleviate a lot of concerns and give you a roadmap to follow.
Some potential risks may include shortages or inconsistent availability of raw materials or products. A mitigation strategy could include identifying alternative suppliers and establishing a relationship in advance. If escalating prices are a risk to your business, consider negotiating more favorable prices or terms depending on how much you purchase.
Secure Financing in Advance
Building cash reserves is beneficial during periods of economic uncertainty. One of the ways to ensure you have enough on hand for lean times is by securing bank financing in advance. Remember, banks are businesses executing their own response plans and often restrict lending to mitigate the risk of default.
Building savings organically is the best strategy. Unfortunately, it isn’t always possible for many small or new businesses. By establishing financing ahead of time, you can ensure you have cash available if you need it before they tighten restrictions on financing.
Change Up Your Business Model
Use the findings from your financial assessment to solidify your business model. Evaluate options for recession-proof services that you can adopt. Examine your business strategy, pricing, or product mix for near-term opportunities that could help you weather the storm more gracefully. Consider negotiating agreements with strategic suppliers or exploring functions that you could outsource to a vendor that may be more efficient.
Though it may seem counterintuitive, this is the time you want to invest in a strategic advertising plan. Audio and digital ads are ideal for reminding your local audience that you are there to serve them. Local radio influencers reassure their audiences by recommending products and services, and their listeners trust the businesses they talk about by association. Digital ads reach your customers where they spend their time, and when combined with audio, they keep your brand top of mind to bring in business and speed up business recovery.
Recession-Proof Your Business Now for Business Continuity and Peace of Mind
The adage, “An ounce of prevention is worth a pound of cure,” couldn’t be more appropriate when considering the criticality of preparing your company for an extended economic downturn. It can be difficult, if not impossible, to right a ship unprepared for stormy seas. Protect your business for the future by:
• Objectively assessing your business’s financial health
• Creating a response plan, ensuring you have adequate cash reserves
• Reminding customers through strategic audio and digital ads that you are there to get through the tough times with them
For help putting this plan in place, you can contact a reputable marketing team to get your advertising strategy started on your budget. Getting as much ready in advance will help you feel prepared when challenge comes.
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