The fear of facing a recession can be very overwhelming.
Sadly, recessions are something that is out of our hands to control. This is why it is crucial to prepare your business to survive a recession whenever it comes.
But first, what is a recession? Just a quick, straightforward definition – Recession is a significant decline in economic activity over a period of time. It can go for six months to a year or years. It happens occasionally throughout history, and unfortunately, it is unavoidable. Recession will happen again as it is part of most national economies. It is like a business; a business has its good profitable seasons as well as its not-so-good challenging seasons.
As I mentioned, it is something we cannot control, BUT what we can control is preparing for it, taking action, and taking proper steps to prepare for whenever it comes. Preparing and taking action is key to recession-proof your business and even personally.
We have the control to plan, act, and be ready for it.
Below, I will share some strategies and steps you can follow to help recession-proof your business.
- Creating a Cash Flow Plan – running out of cash is always a concern for business owners. So, begin by looking at your current cash balances and monthly sources of income. Creating a Cash Flow Forecast Report can help you look at where you are and project for at least the next quarter or two. It can also help you analyze and forecast the amount, timing, and possibility of future cash needs and where you may need to pay more attention to make any necessary adjustments and taking action for the benefit of your business.
- Operating within your budget – this is key for every business recession or not. Following your budget & following your operating plan is one of the best practices for businesses. Businesses have recurring expenses that must be paid consistently, at least monthly and sometimes semi-monthly. For example, rent & payroll – two of the most significant overhead expenses a business can have. Other examples of common operating expenses are insurance & utilities.
So, creating a Projected Budget can be an effective way to track how your business is doing financially, anticipate expenses, as well as an opportunity to plan and make any necessary changes to the operations of your business.
- Finding ways to cut back on expenses – cutting back on operating expenses can be somehow tricky and challenging. Some operating expenses include office supplies, marketing, inventory, travel, and payroll. When looking to cut back, it will be practical to begin with your business’ biggest expenses and work your way down.
For instance; payroll – you may want to look at employee-related expenses such as Benefits. Looking at what benefits can be adjusted.
Concerning the personnel, you may want to look at how you can shift and mix between full-time & part-time employees. This can be done by looking at their working hours, strengths & performances. You may also want to take into consideration and evaluate if they are key employees and/or what they bring to the table for the benefit and growth of your business.
- Inventory – looking at how you can downsize your inventory. Monitor your inventory very carefully & very closely to avoid inventory excess. A great way will be by finding and maintaining a well-balanced inventory count. One that can be easily converted to cash & maintained – kind of “just the right amount” that can hold a good flow to fulfill orders.
- Investing time & building client relationships – this is yet another way to recession-proof your business. By staying close to your clients and building the relationship.
How can I do that? Well, you can do so by…
- knowing & staying in the loop of the changes they are facing within their business
- looking for ways to help them with these changes
- keeping track of the needs that come along with these changes
- looking for ways to fulfill those needs they are having
So, these are some strategies you can follow to prepare, plan, take control, & help recession-proof your business.
These are strategies that BCS can help you with!
So, if you need help with these or any other financial management needs, message us today to schedule your free consultation.