In order to get through challenging economic situations, businesses need to adapt. By employing some reasonable, and often straightforward, measures, companies of any size can prepare themselves for the future. It is about more than saving, it is the art of never letting a good crisis go to waste. In gaining an understanding of the larger financial picture, and how your business factors into it, you can ready yourself for the future. In fact, companies that dedicate resources to improvement during tough economic times often find more success when the market eventually turns around. To do so, it is first essential to conduct thorough research and create a customized plan.
Three Ideas For Keeping Your Business Alive During an Economic Downturn
There are several tried-and-true approaches to maintaining your business through an economic downturn. While it is not a one-size-fits-all solution, there are some standard measures you can take.
Control Your Market Share
You’ve identified your target market, but chances are you share this group with a larger set of businesses. When the economy is tough, business modalities often change. This discrepancy is very apparent with the 2020 move toward remote work and eCommerce. Though the specifics vary based on the economic conditions, tough times always lead to a change of some sort or another. Use this understanding to get competitive.
Find ways to take control of your market share and even increase. Unfortunately, other businesses may not be as quick to adapt during difficult times, this can open up an opportunity for you. It’s a balance of waiting to see what the right step is and acting early enough. Usually, it is a measure of setting yourself apart in an essential way. Consider factors like delivery speed, convenience, and access to the product or service. Look for ways to optimize these to make yourself more desirable to your market.
- Don’t Cut Marketing: Though many confuse it with day-to-day advertising, marketing is actually the lifeblood of any business. It is how to ensure your market share, it plays directly into your positioning strategy. Everything from customer retention to branding lies in the arena of marketing. There are split views on how to approach marketing during an economic downturn. One is to invest more into marketing. This is only viable if it won’t impede cash flow. The other is to reduce marketing efforts or better focus them into a single goal (ex: growing your customer base).
- Focus on Existing Customers: Instead of taking your existing clientele for granted, it’s important to show your gratitude for those with whom you already do business. It can be achieved through correspondence, discounting for regulars, or other methods to highlight appreciation. This plays into marketing as well, since it is a matter of customer loyalty. Though traditional word-of-mouth is often seen as a thing of the past, good public relations is always a wise strategy. From social media to in-person interactions and discount-sharing, there is no shortage of opportunity to leverage your client base into even more business.
Protect Your Cash Flow
Another key step is to preserve your cash flow. Try and avoid tying up your liquid funds in areas that don’t have a rapid turnaround. You want to retain as much fluid cash as possible during difficult times. There are, of course, different approaches to this. You can focus more energy on sales. You can streamline your services toward those which are more profitable. It’s not uncommon for even well-established businesses to encounter cash flow problems. We’re all in this economy together. To mitigate the risk and put yourself at an advantage, try to avoid occupying your funds in matters that only have long-term payoff. Economic downturns, especially prolonged ones, are about balancing the big picture with short-term thinking.
- Monitor Your Cash Flow: Little can be done if you are unaware of the whole situation. Go through the books and meet with your accountant and financial advisor. Get a regular appraisal of how much cash you are working with. Look into the specifics of your accounts payable and accounts receivable. Take steps to make sure that the latter exceeds the former to make sure you are in the black.
- Reduce or Extend Debt: If at first glance, you are leaning into the red, there are some steps you can take. Consider the cost of debt for your business. If you have an amount to pay now which will, efficiency, make you more by limiting interest payments, it’s worth considering. Conversely, if you find yourself struggling to make payments, consider refinancing. You may be eligible for a new arrangement with lower monthly payments or a reduced interest rate. Even if it results in a higher amount paid into the future, it is a way to keep your doors open and ensure that there is a business future.
- Speak to Banks and Creditors: If you are struggling to make ends meet, speak to the institutions which handle your loans and routine payment. Chances are when there are difficult economic times, you are not the only business struggling. Discuss your options, including payment deferrals or interest forgiveness over a certain period. At the very least, it lets those involved know about the difficulties right away. There are usually stimulus packages and other options available to assist companies. Take advantage of them as needed.
- Collect More Aggressively: In all likelihood, the economic hardship wasn’t experienced only by businesses. Consumers feel it too. Often, this leads to delayed payments from your customers. If this is the case (and you don’t already have one), create a collections procedure. It usually includes a friendly reminder note, a second piece of correspondence detailing late payment fees, and finally, a notice that, should payment not be remitted, the amount will be directed to collections. Since these agencies take a portion of the profit, it is only viable as a last resort.
Finally, you want to find as many ways as possible to cut costs. It may seem ruthless, but reasonable decreases in staff, in hours of operation, and hours worked by employees may be necessary. The goal is to be as prepared as possible for the future. While it may seem drastic, consider that it may be an essential step to take when planning for the future. The goal is long-term solvency; and, if you spend too much when the options for earning are limited, you will have a more difficult time when the table turns and the economy improves.
- Inventory: Optimize your manufacturing by looking for ways you can save. Inventory is a massive cost for product-oriented businesses. If you are struggling with the costs of storage and production, do some research. There may be more affordable production opportunities overseas. Perhaps you can cut costs by ordering smaller batches, preventing waste and costly storage bills.
- Assess Need vs. Want: Identify the priorities of your business. Be sure that you are spending money on the essentials and not wasting it elsewhere. Your floral budget may encourage customers to shop through a better ambience, but it isn’t as necessary as your electricity bill. A large-scale example is if a company doesn’t need office space but wants to keep it. Often, it is better to reduce your overheads and go exclusively with the expenses you actually need.
- Share Rent Space: If you are in a position where losing your office space altogether would be too harmful, consider alternatives. Especially when the issue is rooted in the economy as a whole, it is worth noting that other companies are also struggling. Consider reaching out to other businesses with similar workspace demands. Overheads reduce significantly when you share rental space.
- Innovate Your Staff Policies: The last thing a business owner wants is to lose staff. However, when costs get high, manpower is often the first thing to get cut. There are options to let you keep your staff while cutting costs. The most popular route is reducing hours. It keeps people employed, helps manage your workload, and is just better public relations. Another approach is to share workers. It’s common for delivery drivers to work for more than one business. It gives the worker a chance to make the full amount of a regular salary without the payment coming from one business alone.
Additional Ways to Make Your Business More Cost-Effective
Organizations and businesses all over the world are currently facing unprecedented economic conditions. Here are five additional steps to consider that can help you keep your business as cost-effective as possible.
There is a big push these days for environmental sustainability and ‘green’ initiatives, especially when it comes to business. Whether you are trying to build a green office building, use more sustainable energy, or source your products from an environmentally ethical provider, consumers appreciate businesses that are trying to make these important changes.
Take on an Intern
In tough economic times, many businesses turn to interns to add a valued member to their staff. The symbiotic relationship between an intern and your business means that the intern will gain valuable experience in their field, and your business will thrive from having a fresh, young and innovative member on the team for a small cost.
Get Tactical With Taxes
Learning how to play the tax system right will help your business avoid the dreaded director penalty notice or garnishee notice during tough times. When it comes to taxes, some businesses lose track of the petty cash count, allowing heaps of small business expenses to slip through the cracks. Other crucial deductions that you shouldn’t overlook are home-based tax deductions such as mortgage and utilities, or any other business expenses such as driving or restaurant meetings.
Especially if your business is online-based, you should seriously consider outsourcing all of your online marketing to affiliates. By definition, affiliate programs are performance-based marketing campaigns where you pay your affiliates only when a sale occurs. The benefit is that you will acquire many loyal partners, reach a more prominent online presence, and save your money on marketing costs.
Appeal to the Community
By having a strong presence in your own community, you will be able to forge strong bonds with the people who are most likely to support you and your business. By putting on, and being present at, community events, you will make valuable networking connections and encourage new customers.
Struggling to stay afloat during tricky economic times is a challenge for many companies. There are a lot of ways to mitigate the effects and limit the stressfulness of the experience. Take the time to create a plan that works for your specific business. So long as you plan ahead, act responsibly and realistically, and remain willing to adapt, your business has the best chance of long-term success.