It’s no secret that recessions or economic slow-downs can be a challenge for business owners. Not knowing how things are likely to evolve over the next few months or longer means that making decisions can feel extremely risky.
How do you know if your idea is going to work?
Do you have a solid plan B?
Can you take that risk?
While business is naturally a game of risks and challenges, with one eye on the economy, you can develop the right strategies. Both to maximise your bottom line during challenging times such as a recession and hopefully to mitigate the risks of running a business during any time of economic upheaval.
8 Tips to maximise your bottom line during a recession (or at any time!)
Here are our key tips to ride out, and even thrive, during a recession or economic downturn.
Get friendly with your financial reports. You need to know your business inside out. Understand the financial data in your business so that you are clear on how things are doing right now, and then look for any areas that could become vulnerable if the economy takes a turn for the worse.
2. Plan Plan Plan
Develop a plan for all areas, especially those you’ve identified as vulnerable, should the economy start to falter or move in a different direction. A contingency plan is never a waste of time. Understanding areas where you could reduce costs, make organisational changes or even explore new avenues for profit is good for business during good and bad times.
3. Supply chain
Take some time to look at your suppliers – are there any weak links in the supply chain? A recession might not be bad enough to affect your business directly but understanding potential risks to your suppliers will make your contingency plans more robust. How you support, or even diversify, your suppliers could be vital to maximise your bottom line during a recession.
4. Cash Flow
Don’t count the cash until you actually have it. Most business failures are a result of not keeping a close eye on cash. Stay focused on what brings in money, and do more of that. If you don’t know exactly what does bring in the money, find out. Equally, find out where you are losing money – the ebb and flow of cash in versus cash out might surprise you.
5. Set The Right Targets
Do you have Key Performance Indicators and Objectives and Key Results? Bringing in the money is vital and should form the bulk of your planning. But knowing how different activities and roles within your organisation contribute to the goal of cash is key. Spend time figuring out what you need to measure and then ensure your people understand why. Set targets appropriately – some people thrive on sales targets; others find them a distraction. Combine what works for you with what your team needs.
6. Retain Your Customers
We all know that it costs way more to find new customers than it does to retain the ones you already have. However, during tricky times, it is a mantra that is often overlooked.
Nurture those precious customers now and save yourself a headache in the future. Give your customers a reason to become huge fans, and they will be key to seeing you through. There are many ways to delight your customers – you don’t always have to discount your products or services to win them over. In fact, discounting when your margins are lower is never a good idea. Instead, think of ways to increase their sense of loyalty and cooperation!
7. Retain Your Staff
Likewise, keep in mind how much more you’ll spend finding new staff compared to keeping your current people. Invest in your team by upskilling them, improving the way you support them, and ensuring you pay them in line with competitors. Bring in new talent as necessary, but don’t lose excellent staff just because you had no idea how much they were worth.
8. Read, Watch And Learn.
It’s easy to focus solely on your business, or sector, but keep an eye on the wider economy. This will help you see what might be around the corner and where new opportunities might arise.
It’s all about the financial data
The above tips to maximise your bottom line during a recession are vital if you want your business to be successful. Even during good times, you need to stay on top of a wide range of key areas. Once you have taken time to consider the points above it may be that you realise that you aren’t the best person to do all this – after all, you probably didn’t start your business because you love financial reports!
Who does your business need?
Consider hiring a Fractional Finance Director to help you recession-proof your business as much as possible for the smallest outlay. A Fractional Finance Director, already experienced in reporting, finding ways to cut costs, source funding, manage risks etc would be able to bring an outside perspective with new innovative ideas in a very short amount of time. Creating agility in your business in uncertain times is probably the best insurance you have against a slowing economy.
So, if you’re looking to navigate these challenging economic times with confidence, ask us to provide you with an expert Fractional Finance Director for as long as you need one.
One simple, pressure-free phone call to discuss your requirements could make all the difference.