Founders First CDC understands the unknown of a potential upcoming recession can be uncomfortable to think about. Just like a rollercoaster, the economy has its ups and downs, but as a small business owner, you need to understand the drop is what you should be prepared for. Looking at 2008, small to medium-sized businesses were hit the hardest due to the struggle of lending money for banks causing a ripple effect to the SMB community who already has less access to cash resources. But again, like on a rollercoaster, you need to keep your hands in the air and enjoy the ride!
With that being said, it’s important to take preparatory steps to recession-proof your business by developing a tactical business strategy, as outlined below.
Because let’s face it, if you can survive a recession, you can survive anything as a small business owner.
- Diversify your revenue streams:
Diversifying your income streams can reduce your reliance on any one specific source, which can help protect your business from downturns in a particular industry or market. Think of it like planting a variety of crops in your garden. By having different options, some of which may perform better than others depending on the season, you have multiple sources of income.
- Build up cash reserves:
Cash is the ruler of the financial world, and let’s not forget the common phrase “cash is king,” especially during the time of a recession. Having cash on hand can help your business weather unexpected expenses or a decline in revenue, allowing you to continue operating while you navigate a recession.
- Reduce costs:
Reviewing expenses and finding ways to cut costs can help your business operate more efficiently and maintain profitability during a recession. Some common ways to reduce costs can include negotiating better deals with suppliers and vendors, utilizing technology and automation, implementing a remote work policy to reduce overhead costs associated with office space, and examining or adjusting inventory levels to reduce waste and unnecessary expenses.
- Focus on customer retention:
Maintaining strong relationships with your existing customers is crucial for ensuring a steady stream of revenue, even during difficult economic times. Small businesses typically have a customer retention rate between 20-30% according to Business News Daily, but this can vary depending on the company. Improving customer retention is a powerful skill, and mastering it can help your business thrive during a recession, where only the strongest companies survive.
- Adapt to changing market conditions and always stay informed:
During a recession, stay informed about the possibility of consumer spending and buying habits changing, economic conditions and government policies that may affect your business, as well as the actions of your competitors. This will help you make better decisions for your business and be more prepared for any challenges that may arise during a recession.
By implementing these steps, you can successfully pivot your business during economic challenges. Remember, it may feel like a rollercoaster ride, but by having the right tools and mindset, you’ll be able to navigate the difficult times and come out ahead of your competitors.