Recession-proof Your Business for 2023 and Beyond
When the economy is strong, and businesses are enjoying great growth, it is easy to get a little complacent, and even a little bit lazy.
Right now, geo-political, economic, and domestic issues are threatening to impact businesses in the US.
Are you ready for uncertainty? If we have a recession, are you and your business protected? Do you know how to help your people?
Business leaders can take several steps to prepare for uncertain times.
1. Evaluate the business. Do not be complacent. The first step in preparing for a recession is to evaluate business and identify areas that may be vulnerable. Conduct a thorough analysis of the company’s financial health, cash flow, and revenue streams to identify potential areas of weakness. Be brutally honest. Can you survive without revenue? For how long? This will help you identify which areas of the business may be most impacted during an economic downturn.
2. Reduce expenses. This seems basic, but many people are spending money and they do not realize it. During a recession, it is important to reduce expenses wherever possible. Identify areas where you can cut costs without impacting the quality of your products or service or losing talent. This could include reducing marketing expenses, reducing inventory, subscriptions, and renegotiating supplier contracts.
3. Increase cash reserves. What if you suddenly lost a big client? What if businesses lose 20-30%? Business owners should increase cash reserves to provide a buffer during times of uncertainty. This can be done by reducing expenses, increasing prices, and increasing sales now.
4. Diversify revenue streams. Where else can you generate revenue? Are you leaving money on the table? Remind your current clients what you do. Explore new markets, products, and services that could generate additional revenue streams.
5. Improve relationships. During tough times, customer loyalty is critical. Business owners should focus on improving customer relationships to ensure customer retention. This is just one of many reasons why providing excellent customer service is so important. During tough times, your clients do not want new suppliers – they want you to give them the right solutions.
6. Stay informed. Business owners should stay informed about economic conditions and trends that could impact their business. How do you find valuable information? Sifting through all the news can waste time and result in frustration. Try attending industry events, chamber of commerce events, reading industry publications, and networking with other business owners.
7. Review your rates. The Fed has increased the discount rate, which means interest rates for business loans, mortgages, and auto loans are going to increase. Taxes will continue to increase. This means budgets are going to remain tight. Make sure you know your numbers and review them often. If you need to raise your prices, do it sooner rather than later.
8. Protect from cyber fraud and hacking. When the economy gets tighter, some people get desperate and less-than-honest tactics become tempting. You cannot control what hackers do, so you must build a fortress around your most essential information to guard against fraud. Make sure you have the right systems in place to protect your business.
We all need to be mindful of what could threaten our environments and we need to be prepared.