Is your business recession-proof?
I do not know about you all, but that question has been on my mind for several months now. While the experts say we are not currently in a recession (two consecutive quarters of a generally slowing economy), we are definitely in a trying time. I am certainly feeling the pinch of inflation. The price of everything has gone up or is going up.
However, instead of being reactive, I’ve decided to be proactive and do some research of my own, and found these five ways to recession-proof my business.
Build up cash reserves
Small businesses should aim to have enough cash on hand to cover at least three to six months of expenses. This will help them weather any downturn in revenue during a recession. Some ways to build up your cash reserves are to increase your revenue, save a portion of your profits, secure a line of credit, and consider alternative funding sources like grants.
Diversify revenue streams
Relying on a single product or service can be risky during a recession. Small businesses should look for ways to diversify their revenue streams and expand their customer base. This might even mean getting a side gig, so you are not solely relying on your business.
Cut unnecessary expenses
Small businesses should review their expenses and identify areas to cut costs. This could include reducing staff hours, renegotiating vendor contracts, or switching to less expensive suppliers. Personally, I’ve had to review the software and platforms we have been using to see if any of them offered the same services or if I could find anything cheaper.
Focus on customer retention
During a recession, it’s important to keep existing customers rather than acquire new ones. Small businesses should prioritize customer service and communication to ensure that their existing customers remain loyal. Use your email list and newsletter to assist you with this.
Stay informed
Small businesses should stay up-to-date on economic indicators and government policies that may affect their business. This will help them make informed decisions and adjust their strategies accordingly. I’ve always been a reader, but if you are not, try to read at least one news article daily. I am sure you have a news app of some sort on your phone.
Overall, small businesses can prepare for a recession by being proactive, conserving resources, and focusing on their core strengths. Don’t sit around and wait on an economic downturn. Use these strategies to recession-proof your business.
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