Simple and Easy Tips for Conducting Business During a Recession
In times of recession, almost EVERYONE hurts because people spend less money. With less money in circulation, everyone is affected. The following are in my opinion, essential steps for keeping a business operational during a recession.
1. Take Action Now
With a recession going on, you need to act now, even if your business is strong. Knowing what to do, but doing nothing about it is worse than not knowing, because when you know what to do and do nothing, then you have no excuse for failure.
2. Keep Your Business Debt as Low as Possible AND Eliminate Debt If You Can
You can do this by selling off any assets that don’t contribute to the business, or what I refer to as ‘dead assets’. Examples of these are equipment you are not using, a warehouse you don’t need, land for future development – anything you acquired for your business during good times and is not using now.
3. Keep Accounts Receivable to a Minimum
If you have a lot of customers that owe you money, that’s a dangerous situation during a recession. When a recession hits there’s a domino effect; everyone starts to hurt and businesses and people start to declare bankruptcy. If you have enough customers that go under, they could take you with them.
4. Reduce Expenses
This is the best time to reduce all expenses as much as possible. Focus on the expenses that are don’t affecting core business functions.
5. Increase in Advertising
During a recession, a lot of businesses start cutting in the wrong places, advertising being one of them. Advertising is the lifeline of most businesses; cut your advertising and you have just cut your business revenues.
Now there is an exception to this rule and that is if you have bad advertising.
With bad advertising, whether you’re in a recession or in prosperous times you’re throwing money down the drain. The advertising I recommend you keep is advertising that brings in revenue.
What you really should do is figure out what your customers need most during these times. Create a solution and focus your advertising on that solution. That way your advertising could actually increase your business during a recession.
For example, suppose you own a car dealership. People typically aren’t buying cars now, but you could get them better financing by dealing with a good low-rate finance company or offer good deals for their trade-in. You could offer free gas for two months, etc. You’re only limited by your imagination. Come up with an offer that appeals to your customers, and advertise that with your other advertising.
6. Think like a Customer
You need to tap into the needs of your customers. Just think back a year or two before the recession; your customer is not the same person today. Your customer is probably cutting back on a lot of things and needs to adapt to a different lifestyle. So it’s to your advantage to think like your customer.
7. Keep Your Credit Line Available
In hard times, credit lines may be reduced or taken away, so it’s best to keep them active and in good standing. You can do this by paying some bills from your line of credit rather than your bank account, and then paying off the balance when it’s due.
8. Look Over Your Business Model and Make Adjustments
This would be a good time to look over your business model and visualize your business in even harder times, let’s say 10 times worse than the current situation. Would there be adjustments you need to make?
Let’s say you only deal with high ticket items. With the recession 5 times worse, how would that affect your business? What could you do today to prepare for an unstable economy? Also, keep in mind that too much change during an unstable economy can hurt your business (see tip #10.)
9. Hold off On Expansions
Now is not the time to expand. It’s a time to ensure your business is strong, can hold on during the recession, and will be around after the recession. The only expansion I would suggest is if it has something to do with helping out your customers because of the recession.
10. Hold off On Making Drastic Changes
You’ve probably heard the old saying: “If it’s not broke don’t fix it!” Whenever a change is introduced into a business, there can be a positive, negative, or insignificant effect.
I’m a believer in improving and testing, but when times are tough I believe one should be very cautious because the change could eliminate business and once you’ve lost those customers it’s going to be tough to get them back.
Any changes should be carefully considered, researched, tested and monitored. And I strongly suggest avoiding changing anything that’s working now and would affect your customers if it changed.
There are exceptions to the tips above, just like there are exceptions to many rules. For example, if you have a lot of money at your disposal, you might buy a business that is in trouble and get a really good deal. You might tap into a market that a lot of people need right now. But the above tips are meant for the average small business person looking to survive the rough times of a recession.
That’s The Way I See It!
A Touch of Business.com