“The time to recession-proof your business is now. Once the economy starts to downturn, it may be too late to turn the ship and make the changes you need to so your business survives, and even thrives, in a worsening economy,” warns Belinda Rosenblum, CPA, and money strategist for entrepreneurs.
She points out that a recession is long overdue by many measures. And, according to the Capital One Small Business Growth Index (Fall 2019), 85% of small business owners say their business would be impacted if the economy entered a recession in the next six months, yet only 32% say they feel fully prepared for a potential recession.
So given that it is a matter of when—not if—a recession is coming, what are small business owners to do now?
When the next recession hits, will your business be ready?
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Rosenblum encourages business owners to “uplevel” in the following key areas:
She observes that “when times are good, it is easy to let one or more of these areas slide. When times get leaner—and they will—you need to have each of these areas dialed in.”
Rosenblum is also host of Recession Proof Your Business, a free online event. She and other experts from the event share their best tips for keeping your cash flowing in any economy.
Belinda Rosenblum, CPA, founder of OwnYourMoney.com
“A surprisingly large number of business owners do not have a handle on their cash flow or even know their numbers. (It is no wonder that 82% of businesses fail because of cash flow issues, according to a study by U.S. Bank.) Make sure you know your numbers now and create a clear vision and profit plan for your future, including where your ‘lever points’ are to push or pull back depending on the economic situation.”
Jennifer Allwood, business coach and host of The Jennifer Allwood Show podcast
“One key way to recession-proof your business is to have multiple revenue streams. Having a variety of ways you are bringing in revenue at a wide range of price points is necessary to maintain your income, regardless of the economy.
“Incorporating things like affiliate marketing, digital and physical products, a monthly/recurring membership group, one-on-one consulting, ad revenue, and sponsored content can really help your bottom line if the economy takes a downturn. You don’t want to be caught with all your eggs in one basket, unable to make a shift or pivot. Multiple revenue streams will help your business stay flexible and be able to persevere.”
Susan McVea, business sales strategist and host of Master the Sales Game podcast
“Invest in your client relationships! Focus on your best current customers instead of investing a large amount of money to attract new clients. When you create the best results and experience for your existing customer base, they will want to do more business with you and become an important source of new clients as well.
“Business owners will often overlook this as they look for more customers, but don’t underestimate your relationship currency with clients who already know, like, and trust you and your business. It’s much easier to get a repeat client, through good service and delivering on your promises. It’s also considerably cheaper than getting new clients through ads or other means.
“An added benefit: happy clients act as ambassadors for your business and share their experience with other potential customers, in turn helping you to draw in new sales for a much lower cost.”
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Ariana and Tom Sylvester, business consultants and hosts of the Lifestyle Builders podcast
“Build your business with the intent of selling it. That does’t mean you have to sell it, of course! But it means you’ve built your business successfully, without it revolving 100% around you. Tom always likes to ask the question, ‘What would need to be true for that to happen?’
“For business owners, that means truly understanding your business and whom you serve, and putting systems and processes in place in each part of your business engine. That’s what makes it easier for you to step back and hold the vision as the CEO. When you’re the driver of the car (your business), you better keep an eye on the dashboard as you navigate through any ups and downs our economy may throw at you.”
Brandon Lucero, CEO of SoldWithVideo.com
“One of the best ways to recession-proof your business is to find a way to position it in a unique way that appeals to one identity. For example, there are a ton of coffee shops and they are likely all positioned as standard ‘coffee shops.’ However, if one of them changed their name, names of the drinks, had areas for kids, and catered to the identity of parents, it would be the coffee shop for parents. It would stand out and attract a huge percentage of a certain type of identity or demographic—in this case, those that identify as parents.
“People will still spend money in a recession and they will almost always choose a business that caters and reinforces their identity.”
Finally, here’s my own tip: Don’t wait until you’re in a cash crunch to look for financing.
Lenders are already talking about preparing for the next recession, and you can bet that one of the first things they will do when it begins is to start to tighten lending standards. So here’s my tip: secure financing now. In fact, it’s always smart to look for financing before you desperately need it. The lowest-cost financing, including SBA guaranteed loans, a bank loan, or even crowdfunding, often takes time to secure. Now’s a great time to gather documentation (such as copies of tax returns or financial statements), address any issues with your personal or business credit, and evaluate your options.
While you’re at it, get a business credit card if you’ve been relying on personal credit. Many business credit cards don’t report activity to the cardholder’s credit reports (except in the event of default) and also help business credit. If you do need to carry balances temporarily, say if clients start paying more slowly, it may be better for that activity to stay off your personal credit reports so it doesn’t impact your personal credit scores.
Position your business for success now, before you’re left scrambling when the economy starts to slow. The worst that can happen is that your business grows even faster.
“Recognize you have a choice to be a business owner that chooses to make any adjustments needed to leverage the opportunities that inherently arrive in a recession,” advises Rosenblum. Otherwise you may be “swept up in the undercurrent, barely able to keep your head above water and your business profitable. Choose to take action now.”
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This article was originally published on AllBusiness.