Ways To Recession-Proof Your Small Business

Are we in a recession - accounting services - Bookkeeper live

Are we in a recession?

That’s the question on everyone’s minds these days. The experts aren’t sure, but they can’t help but wonder if we’re headed in that direction. After all, plenty of indicators point in that direction: consumer confidence and spending are down.

But some experts are convinced we won’t see a recession this year. They point out that while consumer spending has dropped, it’s not because people aren’t buying things—they’re waiting until they’re sure they can afford them. And while GDP has fallen, it’s not by much—and it’s still growing at a healthy rate.

So what does this mean for businesses? Should you be planning for a recession or just waiting and hoping for the best? Well, if you think about it from a strategic perspective—and if you plan—you can use either outcome to your advantage. If there is indeed a recession coming up soon, then you’ll be prepared for it with an action plan in place; if not (or even if there is one), then being prepared will ensure that when opportunities arise, you’ll be ready to take full advantage of them.

Recessions happen, and you can do nothing about them except deal with them and try to reduce the impact of another one in the future. Therefore, protecting your business from a recession is critical to its success.

Continue reading to learn how to recession-proof your business.

1. Secure capital before you need it.

Cash can be a game changer for a small-scale entrepreneur like you. It can help you grow and expand your market, but you can’t buy the things you need without the help of a bank or investor. So instead, begin making plans to move that capital away from the bank or investor and into your business. But, of course, this means you must first develop a solid strategy before making definite plans.

This is the fundamental approach: before contacting the bank for a loan, draft a business plan, which is essentially a document that lays out your company’s goals and objectives and explains to potential investors how you’ll achieve those goals.

2. Think twice about significant investments.

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Whether it’s an investment in products, employees, or equipment, you’ll have to make difficult decisions as you weigh various investments’ risks, costs, revenue potential, and returns. While each company is different, the higher your fixed costs, the lower your bottom line.

3. Build an agile workforce.

Certain things cannot be changed during a recession, including your ability or inability to fire. This is not a good situation. Make it clear to your teams that you will fire people when it comes. If they are not required to be present at all times, you should let them go.

Remember–no one is indispensable. You can always hire someone, regardless of how good of a worker they are now.

4. Track marketing key performance indicators (KPIs).

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It’s necessary to formulate a small business marketing plan that covers all of the crucial elements required to propel the campaign because you must be able to track your marketing performance.

You must comprehend how many clicks, impressions, and purchases there are in a particular marketing campaign because you’ll need to measure several factors, such as response rates for digital ads and the content that converts the best.

5. Create a business emergency fund.

This is critical. Without an emergency fund to cover your overhead costs, your business could be destroyed overnight, especially in this economy.

Make sure you plan to pay the loan back and make the required payments on time if you need to borrow money for your business. If you don’t, it can significantly reduce your cash flow.

6. Pay down debt.

A company is best positioned to have the most money available to draw from in the future, should you need it, if it enters a recession as debt-free as feasible. The ability to pay off debt early may help reduce interest costs, which can be put aside in cash reserves.

7. Create multiple revenue streams.

This tactic necessitates creative problem-solving regarding how a company might use its current infrastructure to tap into new revenue streams. The idea is to make additional money without making a significant investment. If you generally sell directly to consumers, for instance, think about if you could add business-to-business (B2B) clients or vice versa. Increase your geographic reach by internet selling. Or adapt your production method to a different product.

Getting your financial house in order, making better use of your assets, and keeping your debts low are not magic cures for your business. Instead, they are things that successful companies do all the time, recession or no recession.

During a recession, however, these factors become much more critical. You might get away with not doing them during good times. However, when times are tough, they can mean the difference between bankruptcy and survival.

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