Thriving in a Global Recession - Tips, Techniques and Strategies for Small Business Owners and Entrepreneurs
It's no secret that the world is facing an unprecedented economic challenge. The COVID-19 pandemic has brought businesses to a standstill, and the effects are being felt around the globe. With the decrease in global trade, a decrease in consumer spending, and an increase in unemployment, many experts are predicting a major global recession in the next 6-12 months, and business owners need to be prepared.
As a small business owner, you may be wondering how you can weather this storm if it eventuates, if it doesn't at least you have prepared for any future event and cushion any blow it may impose. BEing Prepared, a motto from Lord Baden Powell in the Scouting Movement can be applied across business as good practice as a context. The meaning is "always be in a state of readiness for what's around the corner..."
In this blog post, we will provide some tips and advice on how you can do that and prepare your business for anything that might come your way when the key factors are out of your control.
So it's important to understand what a recession is first:-
What is Recession?
A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real personal income, employment, industrial production, and wholesale-retail sales. A recession begins just after the economy peaks and ends as the economy bottom reaches its trough.
There are many causes of recessions, but most can be boiled down to two main factors: excesses and imbalances. Excesses occur when growth is too strong and imbalances occur when key sectors of the economy become out of sync.
Recessions can have a significant impact on small businesses. A decrease in consumer spending can lead to a decrease in sales, which can quickly lead to cash flow challenges and business closures if not prepared.
The good news is that there are always actions you can do to prepare your business for any downturn in the economy so that you are not impacted or impacted in a way that would cause loss. Here are some tips:
1. Protect your business with good financial management
Cash is king for any business and during a recession, it is EXTRA important to ensure you are on top of your cash flow management. Make sure you have enough cash on hand for all events by taking a close look at your business’s financials. Do you have enough cash reserves? Are your receivables being collected in a timely manner? Are your expenses too high? Now is the time to make sure your business is operating efficiently without creating a scarcity mindset.
It is also a great time to take a close look at your business expenses and see where you can cut costs. One way to reduce costs is to renegotiate contracts with vendors. The Rule of thumb is every 6 months you should be enquiring for better deals with your phone / internet / energy service providers.
Have you also reviewed your business premises for productivity indicators… there are always new and innovative ways to improve automation systems and carving out space for another occupier to minimise the expense in this area. You may also consider transitioning to an online set up and working from home more days of the week.
Finally, are you monitoring your marketing spend to return on investment? The majority of business owners leave this alone and put it in the too-hard basket yet paying thousands of dollars per month on marketing and advertising that is not working or not working as well as they had thought. This is profits flowing out the door and requires constant surveillance.
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2. Build up your cash reserves.
When the global economy is on shaky ground, which is out of our control…. We can't control what the stock market or interest rates will do… we may have a hunch …, but we can take one important step and that is to "be aware of our cash reserves" and ensure we are building them up with profits made on a consistent basis.
It is important to have a healthy cash reserve to fall back on in times of economic uncertainty. Start putting aside a budgeted amount each month to give you a cushion to fall back on if revenue decreases, without having to pay for money to keep your business short-term trading positive. The bonus to this is gaining a few extra dollars from the increase in interest rates. A basic rule is to make sure you have enough cash on hand to cover your expenses for at least 6 months. This will help you weather the storm and keep your business afloat until things start to improve.
Of course, saving isn't always easy. It takes discipline and commitment to set aside money on a regular basis. But if you can make it a habit, you'll be in a much better position to soften the impact of a recession.
There's no need to put all of your eggs in one basket, either. A mix of savings and investments will help you weather any economic storm. So start building up your cash reserves today and be prepared for whatever the future may hold.
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3. Consider alternative financing options.
If you are planning on expanding your business or taking on any big projects, it is important to consider alternative financing options. Traditional bank loans may be more difficult to obtain during a recession. However, there are other financing options available such as government loans or private equity funding.
These financing options can bridge the gap between where you are now and where you want to be. They can provide the resources you need to take advantage of business opportunities at these times.
4. Diversify your revenue streams.
If your business relies heavily on one source of revenue, now is the time to diversify. Look for other ways, other markets to explore with the same product/service to insulate your business from economic downturn. Now is also the high time to move your business online if you haven’t done so already. Customers are increasingly shopping online for products and services, and this trend is only going to continue. By having an online presence, you will be able to reach a larger number of potential customers.
5. Delay major purchases.
Be cautious with high-end purchases, unless you have an immediate cash inflow from these purchases … you might look at alternatives for funding from your own cash reserves. Instead focus on streamlining your operations, innovation and education of yourself and team to keep the cash flow healthy. All things move in time and like a recession it will pass, investing in your operations, systems and team will put you in a great position for when the markets start to rise again.
Once you have your marketing message tweaked and provide you with leads, consider low-priced tactical marketing methods to generate more leads. Search engine optimization, pay-per-click advertising, and social media marketing are all areas that can assist you reach more customers and grow your business.
Developing a training and development program for your employees, and providing responsibility for automation, systemisation can improve morale and increase productivity within your business. You might find key players step up and provide leadership in areas of the latest trends in your industry and other areas to keep a breast upon.
You can also invest in technology upgrades. This includes things like new software, hardware, and cloud-based services will always increase productivity and automation drives information required to make key decisions quickly.
Whether it be a pandemic, economic downturn, or climate impact… it is important for all business owners to "BE PREPARED" and ready for any impact that is coming. Taking steps now to prepare your business for "readiness" is not only a smart move for longevity, but it is also essential to reduce stress to yourself, your family and your team members.
Reviewing expenses, building up cash reserves, considering alternative financing options, diversifying revenue streams, and investing in your operations, systems and team are all key steps that will help ensure your business’s survival during tough economic times.
It's also important to focus on your customers and make sure you're providing them with the best possible experience. This is a difficult time for everyone, and your customers will appreciate your understanding and flexibility.
Finally, don't be afraid to ask for help. There are many government programs and private organisations that can provide assistance to businesses during this difficult time.
Having a business mentor is an invaluable asset during a global recession. A mentor shines the light on areas that need attention, assists you to prioritize these within the parameters of your business and champions you as you move through the spaces of progress on your pathway to success. In addition, a mentor can be a great source of support during tough times. A good mentor will invest time and energy in your business, and their guidance can be essential for weathering a recession.
So, if you are a business owner and/or entrepreneur and you're wanting to ensure you are not impacted by any economic cycle we are in, consider finding a mentor who can help you navigate your individual pathway to success.
Want more information on this or be put in contact with a Business Advisor suitable for your needs. Book a quick chat on the link below and let's find out what your needs are.
📧 Email: glenis@morecustomersmoreprofits.com
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