Protecting Your Business From A Recession

It’s not a nice thing to think about, but the reality is that our economy is on the brink of yet another recession. In fact, many experts believe it’s already started. The last recession the UK saw was in 2008, and lasted until 2010 before things started to improve. During that time the financial crisis hit small businesses much harder than large firms, and around 1.8 million small businesses went under as a result.

Now we’re staring into the face of another recession, it’s time to protect your business before the storm really hits, so that you stand the best chance of survival.

Understand your Cash Flow

It’s now more important than ever that you understand the finances of your business and how your decisions affect them. Even if you have an accountant who usually handles the financials for you, sit down with them and get to know your cash flow.

That means looking at statements and combing through documents month by month. Based on your historical spending, you should be able to create a realistic monthly budget. From there you can develop a spending plan, factoring in the worst-case scenarios based on what you come up with. Once you have it done, check on your cash flow every single month and make any adjustments needed.

As you review your spending and budget, make sure you think about any purchases you’ll need to make in the next 18 months. Because while the average recession lasts 11 months, some can last up to a year and a half. Figure out what you can delay if you need to, and review all of your costs to make sure you’re only spending in areas that give you a significant return.

Note: that doesn’t mean cutting things like advertising completely. Even as you try to save money you need to avoid fading into the background in your customer’s eyes – that’s guaranteed to land you in even more trouble. Advertise aggressively and stay visible.

Diversify

If you are able to, now is the time to diversify your business offerings. Offering just one product or service really limits your market, while offering a range gives you more flexibility and access to a wider range of potential customers, which means an increased chance of surviving should the worst happen. This means that if one area of your business is hit hard by the recession, you still have other areas you can focus on and build. So consider what products or services you could add to your line-up for minimal costs. For example, if you make products, are there similar products within the industry you could make as well?

This is also a good time to diversify your marketing efforts. Are there other ways to reach potential customers? Could you sell products on other platforms, like Amazon or Etsy? Are you making the most of your social media platforms, your email database or your networking opportunities? Assessing each part of your business and adding on just one extra element could be the difference between surviving and struggling.

Strengthen Existing Customer Relationships

It costs you a lot more to find new customers than it does to retain and upsell to existing ones, so part of your strategy should be evaluating existing customer relationships and working on those. This could mean starting up a reward program that gives them discounts or freebies for sticking with you, offering subscriptions or even giving your customers input on how to improve your services. Proactively engage with your customers so that they feel seen and valued, and therefore less likely to leave when times get rough.

Remember, a recession doesn’t have to mean a panic, and it doesn’t mean the end of your business. All you really need to survive a recession is to be focused, flexible and financially aware. Consider it an opportunity to get to know your company better and get creative with your offerings.