5 Ways to Protect Your Business From a Recession
Our current economic state is stressful. As the word "recession" floats all over the news, it seems we are in a sort of "will we or won't we?" debate between those who believe a recession is unavoidable, those who think it can be side-stepped and those who feel it could go either way. Given that it's hard for financial analysts to know what will happen, small business owners have little hope of being able to pinpoint precisely what economic turn the country will take and when. The best option is to prepare our businesses.
1. Diversify
Consider what products you could add to your line-up at a minimal cost. If you're already making soaps and bath bombs, consider adding products like salt scrubs or body washes. Consider expanding to baby blankets if you specialize in knitted hats for infants.
2. Understand your cash flow
Even if you have an accountant handle your financials, now is the time to sit down with your statements and know your cash flow. Take a look at your documents month by month. Based on your historical spending, you should be able to create a realistic monthly budget. Develop a spending plan, factoring in worst-case scenarios based on what you come up with. Check in on your cash flow every single month and adjust as needed.
3. Prepare your team
Make sure each team member does the work best suited to their strengths. If someone is underperforming or you realize you don't need an absolute position to fulfill a specific task, make the edits. If you downsize, be aware that those remaining may fear for their jobs. It is essential to explain the situation carefully, reassure your team of their value and offer cross-training or other professional development.
4. Strengthen your customer relationships
The best move you can make to recession-proof your business is to convert one-time customers into repeat visitors. There is a slew of ways to do this, but here are some of my favorites:
Offer a rewards program. You know how these work, and you're likely part of several. You spend money and earn rewards for every dollar you spend, whether it's $5 off a bag of coffee or a free candle. Rewards programs keep customers returning, make them feel special, and encourage them to spend more on each transaction.
5. Be willing to change your mindset
Sure, maybe a gourmet cotton candy store is your dream business. But during a recession, realize that you must be flexible and adapt to a changing market. Unless you serve only the wealthiest customers, you will likely need to change or add to your offerings. So maybe you have to start hosting children's birthday parties for a little while. If you hate it, you can always drop that service once things look up financially. You've just added a permanent revenue stream if it's not so bad.
A recession doesn't have to mean panic — keep focused, flexible and financially aware. This is an opportunity to get to know your company better and get creative with your offerings.