How To Thrive In Business During a Recession

Are you a business owner feeling the effects of the current economic recession? If so, you’re not alone. Many entrepreneurs are struggling to make ends meet and are feeling overwhelmed by the uncertainty of the future. But there is hope!

As a fractional CFO to several businesses in various industries, I’m here to tell you that there are ways to thrive in a recession. Below are some tips on how to make it through this difficult time and come out ahead.

Don’t Panic and Stay Positive!

It’s easy to get overwhelmed by the news and the uncertainty of the future, but panicking won’t help. Instead, focus on the things you can control and take action. Look for any opportunities that can come from this difficult time. With the right mindset and strategies, you can come out of this crisis stronger and more prepared for the future.

Reduce, Pause, Delay or Cancel Costs

One of the most important things that business owners can do during a crisis is to reduce costs. This could include reducing overhead costs, renegotiating contracts, or even cutting back on staff. But how do you know where to start?

A good place to begin is an expense audit for the last 3mo and seeing where money can be saved. Think about any costs you can reduce, pause, delay, or cancel. Remember that this can be temporary to help you build a strong financial position. For example, look at all subscriptions and services that are no longer necessary and cancel them. Negotiate with vendors and suppliers to get better deals and explore ways to reduce overhead costs.

Other cost-cutting measures include reducing employee hours, outsourcing tasks, and utilizing technology to reduce labor costs by saving time. By taking the time to evaluate your expenses and make smart decisions, you can ensure that your business is in a better place to weather a storm.

Build a cash runway

Utilize some of the cost reduction to boost your cash savings. The other alternative is to increase sales through visibility and outreach strategies. Remember that those activities can help if you stay consistent but might take 2-3mo to see some solid results. Think about where your last 5-10 sales or clients came from and double down on those activities that directly tie to increasing revenue.

Make sure to apply or access lines of credits responsibly ahead of when you will need them. You want to keep your options open and available in case you need. By the time you need them, it will be too late. Worst case, you can always consider a business loan or credit card to help you weather some short-term cashflow needs. Make sure to have a plan for paying back those loans within something the business can actually afford.

Offer payment plans if needed but make sure to have a strong follow up process. People are looking for flexibility not necessary challenging your prices if you are clear on the value you deliver. Giving people options on ways they can work with you, will open up the door to capturing more potential business. Ask your vendors, suppliers, and anyone you do business with for a payment plan or terms to extend the time you have to pay for a good or service.

Research some business grant options that you might qualify for. While not a guarantee, this can help boost cashflow short-term that you can invest into more revenue generating activities in your business. Find some free resources locally through the Small Business Administration (SBA) or local chambers of commerce.

Re-evaluate Your Business Model

Take a step back and look at your business model. Are there areas where you can improve efficiency or make changes to better serve your customers?

Even in times of economic success, it is important to continuously re-evaluate your business model. By taking control of your business and taking the right actions, you can come out ahead and start building for the future. Re-evaluating your business model also allows you to start to create a financial plan to help prepare your business for a potential down-turn.

As Chris Guillebeau said in his book, The Art of Non-Conformity, "It's never too late to start planning for the next crisis". By periodically re-evaluating your business model, you can take the necessary steps to ensure your business is thriving during this time, and long after.

Invest in Your Business

While it may seem counterintuitive to increase spending with a recession looming, investing in your business is key to success - especially during times of crisis. Think of the cost reduction exercise as a way to free up funds to invest in growth by reallocating those dollars.

Some areas where you might invest to get you through this time are automating processes, investing in marketing, advertising, and upgrading your technology. By investing in the right areas in your business, you can be prepared for whatever comes your way and can thrive, even amid a crisis.

Utilize Technology

Utilizing technology is a great way to reduce costs, increase your productivity and maximize your profits. Technology can help reduce costs by automating processes, reducing manual labor, and providing valuable insights into company productivity.

Technology can also improve customer retention by allowing you to track and analyze customer data, create personalized customer experiences, and provide better customer service. By leveraging the right technology, you can not only reduce costs and increase efficiency, but you can also improve customer satisfaction, increase customer loyalty, and therefore increase overall profitability.

Network and Build Relationships

Networking and building relationships are essential for any business owner, but it’s even more important during a recession. I have personally seen the power of networking and building relationships in my own business. I have been able to connect with amazing people who have helped me take my business to the next level.

Whether it is through referrals, collaborations, or simply having someone to bounce ideas, networking and building relationships has been a key factor in my success. Reach out to other business owners and professionals in your network to get advice and find new opportunities. You never know where new possibilities or partnerships may come!

While the current economic recession can be difficult, it doesn’t have to be the end of your business. By following these tips, you can not only survive, but also thrive during this difficult time.

If you could use some help making sure your finances are in order to prepare for any crisis that may occur, learn more about how we can help! Then, set up a consultation with CFO to review your current financial situation and provide some options on how we can best support you.