How Business Can Survive During Tough Economic Times?
A decrease in sales and consumer confidence threatens all SME businesses. Small companies are defenceless as they often don’t have the reserves to assist them to go through difficulties. How can you recession-proof your business? Here are a few tips on how to help your business survive during tough economic times.
Ensure a Consistent Cash Flow
The first would be to protect your cash flow. Cash flow is the lifeblood of any business. To ensure your small business is healthy, you need to have cash flow through continuously. Having cash flow out will never be the problem. Maintaining consistent cash flowing in is a whole different ball game. Besides the main point of having more sales which will lead to a greater increase in cash in-flow, you must also learn cash management. This will be a handy skill to have as this will help to ensure a consistent cash flow which will result in a healthy cash balance.
Reduce Inventory Costs
Next, it would be to examine your inventory management practices. Take a look at what you could do to reduce inventory costs without sacrificing the quality of goods or inconveniencing customers. Could an item be sourced from a different supplier at a better price? Are there any alternatives that could help reduce your costs? Are you over ordering any of the items? It isn’t a set rule that you need to keep ordering something from a particular supplier or do things a certain way. If a different alternative could save you money, why not do it differently then?
Concentrate on Main Competencies
Besides that, the next point is to focus on main competencies. There are a variety of articles preaching about diversification as a strategy for small businesses’ success. However, ‘diversification’ is usually simplified into ‘different’ which then carries an entirely different meaning. Adding other products or services is not diversification, it is just variety. At best, these are usually a waste of time and resources. The worst-case scenario is, it can damage your core business by pulling valuable time and resources and putting them into unnecessary things. This may also damage your brand and reputation. Think of what your core business is and drop the extras. Focus on what you do best and that is the best way to recession-proof your business.
Expanding Your Customer Base
Next would be to create and execute strategies to win the competition’s customers. If you want your small business to prosper during tough times, you need to think about expanding your customer base, and what better way to do that than drawing in your competition’s customers! There are different methods in executing this. One of which is to offer something more or different as compared to your competition. If you are thinking along the lines of what you can offer to entice their customers into becoming your customers, then you are on the right track. Apart from that, providing better customer service is also one of the more popular ways to outdistance the competition.
Capitalize on Established Customers
Following that would be to benefit as much as possible from current clients and customers. There’s a saying, ‘a bird in the hand is worth two in the bush’. If interpreted in the context of small businesses, it carries the meaning of your existing customer is an opportunity to make more sales without the extra costs of finding a new customer. He or she may also be a loyal customer which will, in turn, give you even more sales opportunities. This is an important point to take note of when recession-proofing your business. You can’t afford to ignore the potential profits of established customers.
Try Not to Reduce Advertising and Marketing
Another important point to take note is trying not to reduce marketing! During these tough times, many small businesses make the mistake of cutting their marketing budget. But this is exactly when marketing is essential to your small businesses. It is during these times that consumers are restless and will be looking to make changes in their buying decisions. This is your moment to help them find your products and services and choose you rather than others by getting your name out there. Therefore, do not quit marketing, instead of step up your marketing efforts!
Ensure Your Individual Credit is Good
The last point is to keep individual credit in good shape. It is more difficult to get a loan during tough times, and small businesses are usually the first to disappear. If you have good personal credit, it gives you a better chance of being able to obtain the loan needed to keep your business afloat if the need arises. Keeping tabs on your personal credit rating as well as your business one will help when you want to recession-proof your business. Also, do what you can to keep your credit ratings in good shape.
To conclude, it is impossible to ensure that your small business is one hundred percent recession-proof, but implementing the practices above will help ensure that your small business will survive tough times and may even profit from it.