Does the recent recession have you worrying about your small business?
COVID-19 has had an unparalleled impact on economies around the world. The damage to the stock market and the shelter-in-place orders that kept small businesses closed for months has resulted in fears that the Canadian economy was slipping into a recession (or even a depression). The Federal government has put programs into place to support both businesses and individuals, but for many, that isn’t enough. A recession can last months to years, so your business needs to be ready for the long haul.
If you’re worried about decreasing sales and consumer confidence, there are some steps you can take to make your business recession-proof. Here are some suggestions!
Watch Your Cash Flow
During a recession, protecting your cash flow becomes the most critical part of keeping in business.
In an ideal situation, you’re bringing in more money than your expenses and turning a profit. If your sales and clients are down because of a recession, making a profit can seem like an almost impossible task. To find some extra money, you’re going to need to hit the books.
Every small business, no matter how well-run, always has some inefficiencies. These can cost your business anywhere from hundreds to thousands of dollars every year. The trick is to figure out where these inefficiencies are.
A professional bookkeeper can help you sniff out these inefficiencies and suggest some places where you can save money. For example, you could be spending far more than you need to for internet or phone services. Switching to cheaper plans could save you hundreds of dollars a year.
Reduce Inventory Costs
During a recession, your sales could be down, which means you might have surplus inventory just sitting in a warehouse, taking up space and costing you money.
Your inventory costs are a place where you can potentially find big savings. For example, you could consider switching from a warehouse to a drop-shipping alternative for your products. You could also shop around, as many businesses have dropped the price of their services due to the impact of COVID-19. You might be able to negotiate a better deal with your current warehouse provider. You never know until you ask!
Support Your Current Customers
A recession goes hand-in-hand with a reduction in customer confidence. Even if their personal cash flow hasn’t taken a hit, people are less likely to spend money during a time when the economy is in trouble. To keep in business, you’re going to need to shore up your relationships with your current customers.
It’s a great time to contact your loyal customers to see how they are doing and if there’s anything you can do to help. Their needs may have changed because of the recession, so you should do your best to meet those needs if you’re able. If this means giving your customers a temporary deal on your services, it could be worth it. After all, keeping loyal customers now will mean that they’ll stay on when times improve.
Win New Customers
Expanding your customer base during the good times is important, but expanding it during the bad times is absolutely vital! It might be time to offer some sales or discounts on your products or services. Do some research on the kinds of marketing your competitors are currently doing to avoid being undercut. And speaking of marketing…
Keep Marketing Yourself
When you look at your current cash flow, you might think an easy place to trim some fat would be in your marketing budget. However, this decision could significantly damage your ability to connect with new customers.
A better plan is to get smarter with your marketing dollars. For example, if you’re running print ads with little return-on-investment, it might be time to switch to digital marketing avenues like social media. This shift in strategy is especially important when more and more people are spending time online.
No business can become entirely recession-proof as there are too many variables at play. But what you can do is put some measures into place to help you survive a recession and come out the other side in much better shape than others in your industry!
To help you monitor and manage your finances, we invite you to contact The Number Works today. With our years of bookkeeping and accounting experience, we can help your small business navigate this recession and whatever is yet to come!