How to Recession-proof your Business Today

The ongoing global pandemic of COVID-19 has hugely impacted the world’s economy — many businesses were forced to close their doors, and others are on the verge of giving up. The problem is that most companies fail to react quickly. They wait until their business is suffering before they try to find ways to save the business. Knowing how to prepare your business for a recession can help you re-open your doors or stay afloat as the economic trends continue to change. In this blog, we will share various tips to help you recession-proof your business now.

You can typically sense a recession creeping in with these signs:

• An increase in unemployment
• Consumers are spending less
• Lower reported company revenue
• Rising central bank interest rates
• Higher government borrowing

1- Commit to making moves to boost your business now

Take an offensive approach. Most talk about ‘surviving’ a recession or keeping your business afloat during a financial downturn. While survival is important, you can do much more than that. Not only can you survive, but you can also leverage it to your advantage if you prepare your business well. While most businesses will take their ball out of the court, you need to decide whether you want to play defense and stay low, or play offense and commit to making moves during the game. A recession is a time to put your game face on and reinforce your business activities.

2- Reposition your brand

Plan for different scenarios. For your business to stay afloat, it must be able to operate within different scenarios. You must find ways for your business to stay relevant despite ever-shifting environments. According to Business Insider, here are some questions you can ask yourself:

• How can you pivot your offerings and products and turn them into a need instead of a want?
• How can you shift audiences so that you are selling to those who will be insulated from the effects of a recession?
• How can you create a low-cost service or product option that will enable you to continue making sales even when people aren’t able to spend the way they used to spend?

Keep a list of expansive ideas. Many businesses pivoted their products and services to fit the needs of our current crisis. For example, many retail fashion stores switched to selling face masks when customers were buying fewer clothes. Think in advance a few ideas of ways your business could adjust to the needs of your customers during a recession. While you may not be able to predict the future, you will already have a starting point.

3- Invest in technology

Make development a priority. When things are going well, too many businesses unwillingly tone down their development plans. If you’re doing this, you’re sabotaging your business from success. A successful business is constantly developing and searching for ways to better itself. If you read our previous about 9 Takeaways for unicorn startups, a business should constantly iterate itself to adapt and reach bigger audiences. According to entrepreneur.com, business development lays the groundwork for future sales. Set appointments in your schedule for time to network, brainstorm new strategies, and so on.

Reduce your costs by investing in technology. This reduces the amount of time spent on unnecessary tasks, shrinks the chances of human error, and helps lower costs. Especially when work from home is the new default in most countries, you should look into digital equipment to keep operations running smoothly. Of course, your investment priorities depend on your type of business and your service or product. Regardless, though, now is the time to invest in technology that makes your work easier.

4- Get a hold of your finances

Create a quarterly cash flow forecast. A downturn might force you to deal with liquidity constraints. You need to have a complete understanding of where your cash is coming from and how it is spent.

Hacks to improve your cash flow

• Collect any receivables as quickly as possible
• Offering discounts to customers who pay promptly
• Request deposits for some products and services
• Negotiate favorable terms for your liquidity when paying your suppliers

Reduce expenses. Examine the way you spend. Knowing the difference between what’s discretionary and what’s essential is critical. Look at areas where you can spend less or smarter. For example, you can try to negotiate with your vendors for better deals and packages. If you have an office, try cutting back on rent by subletting part of your space or by relocating to an area that costs less. In addition to this, keeping track of your inventory is essential when it comes to creating a recession-proof budget. Regularly review your inventory to make sure no cash is tied up in excess merchandise that will be even more difficult to liquidate during a recession.

Maintain an emergency fund. Who knows when your cash flow might dry up or banks might tighten up on lending? You need a healthy emergency fund to beat a downturn. Any business, whether it is a startup or a corporation should integrate plans for an emergency fund into its business plan. Think about keeping a separate account for savings so you’re not tempted to dip into it for conventional expenses. According to Forbes, your target balance will depend on the size of your business, its volatility, its revenue, and its margins. Consider it a good start if you have enough to cover three to six months’ worth of expenses.

Pay off all your debt. Debt compounds quickly when budgets tighten, so pay it off while you have the cash. You should start with the one with the highest loan rate, then work your way down. If you follow the previous strategies, you should have enough cash to do so.

“It’s also important to manage debts on a relational level — both what you owe vendors and what customers owe you.” — Forbes

5- Keep your marketing game strong

While reducing your costs during a recession, do not take the hatchet to your marketing efforts. In fact, during these times, marketing becomes crucial. 65 percent of a company’s business comes from existing customers. You need marketing strategies that continuously nurture your relationship with your customers. Keeping your business on their minds will make them keep coming back.

Try exploring new marketing strategies to increase brand awareness with your audience and increase sales. Email marketing is the most common one: you can send out weekly newsletters and look forward to building your subscriber base. While other companies scale down on their marketing, you can use this as leverage to boost your visibility and stand apart.

6- Look out for new hires opportunities

Now is also a strategic time to think about who you need on staff. When unemployment rates increase, the available talent pool increases. Some highly skilled people will be searching for a new job to fill. Planning your next hire early will prepare you to give an offer to the right person you need.

7- Keep your financing partner, vendors, and customers close

Stay in contact with your lenders and vendors. An essential step to recession-proof your business is to proactively communicate. Engaging in conversation with your lenders will reveal the reliability of your business. On top of this, make sure to keep your vendors in check to ensure your cash flow has not been compromised. Review your contracts, understand your customers’ needs to minimize canceling or postponing orders. With an understanding of the big picture, you can form a plan to avoid disrupting the supply chain and maintain positive cash flow.

You can discuss your business risk rating, which loans have been downgraded, and other areas that could impact your business. This will help you to understand how your business will be treated moving forward. — Entrepreneur.com

Reinforce existing customer relationships. While losing customers is never good, it can be particularly hazardous during a recession. Your customers are the ones that will generate sales — this is why they are your priority. 80 percent of your future profits will come from just 20 percent of your existing customers. Focus on delivering exceptional customer service and try to find creative ways you can add value for your customers without increasing your costs. In addition, evaluate your after-sales services to increase your chances of keeping your customers loyal.

8- Sell, sell and sell as much ahead of time

When things are going well, you want to sell as much as you can to bubble wrap your future investments. You need to sell as much as you can when selling is easy. When your offers don’t work anymore, iterate and continue selling while you can!

Conclusion

To recap, here are the main things you can do to prepare and win during a recession:

• Take the offense and commit to boosting your business
• Reposition your brand
• Invest in adaptable technology
• Get a hold of your finances
• Keep your marketing game strong
• Look out for new hires opportunities
• Keep your lenders, vendors, and customers close
• Sell, sell and sell!

Here at Zetl, we help SMEs by providing a variety of funding solutions to help them stay above their finances and cash flow. We know that liquidity is essential for a business to keep its doors open especially in the midst of a pandemic. We help you unlock working capital in less than 24 hours so you can focus on what truly matters — supporting and growing your business.

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Fully digital. Complete everything online — submit documents through our web app, and all contracts are executed digitally.

Confidential. Your client never needs to know about Zetl. All financing is fully confidential.

No personal guarantees. We believe business risk should be kept separate from personal liability.

Unlock funds by signing up on our website now! — www.zetl.com