Business Thrive During an Economic Recession: Economic decline (or recession) can be seen as an economic opportunity, not a hindrance. And with the right strategies, you can help your business succeed under these conditions.
Most entrepreneurs at least partially depend on the state of the economy to help them grow their businesses. During high consumer confidence, spending is high, companies are willing to take more risks and most businesses are able to generate more revenue. But during times of difficulty, financing is difficult to obtain, revenue dries up and the entrepreneurial environment is more barren.
That said, it is possible to see an economic decline (or recession) as an economic opportunity, and not as an obstacle. And with the right strategies, you can help your business succeed under these conditions.
Prioritize your cash flow
Your biggest priority should be your cash flow, or the money coming into your business. Many businesses have been ruined during the recession because they were not able to keep their cash flow positive. This can also happen when your business appears profitable on paper. To have a positive cash flow, you have to issue invoices immediately, follow up if they are not being paid and plan to roll back costs when customers are not able to pay. It is also important to keep a tight lease on your expenses and pay until they are delayed until they are required to pay.
Diversify your revenue streams
If you diversify your revenue streams then you can protect your business and increase your chances of financial survival. The idea here is to create new means of generating income for your business; That way, if a recession wipes out a revenue stream, you will have enough backups to sustain your business. This is a common strategy to reduce risk, and you should have plenty of options to consider. For example, you can start selling different types of goods, subsidize blogs with advertisements or provide different services to your customers.
related: For savvy entrepreneurs, an economic downturn creates opportunities
Focus on your core competencies and current customers
Of course, you should not invest too much in areas with which your business is inexperienced or unfamiliar; By doing this your budget can be very slim and can end up causing you risk. Instead, focus most of your core competencies and your current customers. Your core competencies have allowed your business to flourish at this time, so they should be able to take you forward even during financial hardship. Likewise, these customers have proven themselves loyal, so they are less likely to be compared to your new customers during a recession – as long as you continue to provide them with the best possible service.
Beat the competition
During a recession, your competition becomes a more serious threat. Every customer you win can worsen your situation; Conversely, every customer you win can strengthen your position. Use this as an opportunity to win more customers than your competitors. You can do this by differentiating your brand in some meaningful way; For example, can you reduce your prices? Provide better quality? Provide more robust customer service? Stand out in some way that matters to your target audience.
During the recession, many businesses will need to cut to stay away. If you find yourself in this situation, it is important to make the “right” deduction. For example, many entrepreneurs cut their sales or marketing budgets, but these can make your financial situation worse. Instead, focus on areas such as:
- Inventory. Pay attention to how much product you are keeping in inventory, and try to reduce what you are holding.
- Office / space expenditure. How much is your office space wasted? Is it possible to go to a smaller place or a cheaper area to cut your expenses? Is it possible to work completely remotely?
- Technology. How many membership services are you paying for, and do you really need them all?
- waste. Review all your expenses, and look for things that are not actively adding value to your organization. Be prepared to find any type of waste.
Make long term plans
Many of the decisions you make during a recession will be focused on the short-term, which will help your business survive for months. But it is also important to use this time to invest in some long-term strategies. Long-term branding and marketing strategies, such as search engine optimization (SEO) may not pay off immediately, but they have a much larger lifetime return on investment (ROI) than comparable short-term strategies. If you start building equity now, you can build a runway for yourself, which can help you avoid the most danger from economic woes.
Helping your business survive the economic downturn is not easy, but it is possible with the right strategic initiatives. The next time the economy hits zero, equip yourself with the right values, come up with several backup strategies and be ready to adapt to new circumstances.
Related: 7 Ways Entrepreneurs Drive Economic Growth