Whether it’s due to a lack of consumer spending or increased competition, being prepared for any type of economic change can help ensure the success of your business during any recessionary times. By taking proactive measures, businesses can weather any incoming storm while continuing to grow their customer base and generate revenues. Let’s explore how small businesses can mitigate the impact a recession or other economic challenge could have on their bottom line.
Adopt more efficient methods of production. Adopting more efficient methods of production before a recession can help businesses remain competitive and resilient. It can cut down on the input costs, labor, or energy associated with production, helping companies maintain their level of output, even if their total revenue dips. Furthermore, they can increase their output while using fewer resources. This leads to greater profitability during the recession and afterward when the economy recovers. Here’s a strong example to follow: everyone knows how printing costs can eat up a marketing budget. So, in setting up ZoePrint.com, the company put a focus on cost savings to keep printing prices low, stripping out much of the usual complexity of ordering printing. They also employed sustainable printing practices, including the use of 100% renewable energy to power our business.
Invest in technologies that will help reduce operational costs or increase efficiency. Investing in technologies that automate labor-oriented processes can help businesses reduce costs associated with staffing and labor management costs. Doing so ahead of a recession will put businesses in a better position when economic conditions turn sour, allowing them to remain competitive against their competitors. Additionally, reducing costs can help the company save money for other investments or be used as emergency funds should an unexpected problem arise during the recession. For example, Kayenta’s treasury management system is built using today’s modern technology while keeping modern challenges in mind. From data integrity to architecture security, their treasury management framework is built to handle the biggest risks, while simultaneously providing stakeholders with data transparency.
Diversify your sources of revenue. Diversification helps spread risk by creating a more balanced portfolio with multiple sources of income. This means that, when one source of revenue experiences a decline, other sources may be resilient enough to counterbalance the loss, reducing the impact of economic recessions. By diversifying your sources of revenue, you create more stability and financial resilience for your business during turbulent times. Additionally, a diversified portfolio can allow businesses to remain competitive with offerings that appeal to a variety of consumers, leading to continued stability despite potential market volatility. A great example can be seen in The Lash Professional, which expanded from eyelash extension services and product sales to providing online and live training opportunities for aspiring lash artists across the country
Look into alternative sources of financing. Cash flow is crucial for any successful company, not only for managing day-to-day operations but also to anticipate future difficulties that may require outside funding. That said, recessions can cause cash-flow issues for businesses while making it more difficult to access traditional sources of financing such as bank loans. Alternative financing may provide the flexibility needed to navigate through the downturn by providing capital earlier in the cycle when traditional lenders have become risk-averse and are less likely to lend. Alternative sources of financing also provide businesses with flexibility when it comes to payment structure or interest rate, allowing them to tailor options that best fit the business’s needs. Take the extra step and do some research into potential funders for that just-in-case scenario, so you’re not scrambling for the best options. For example, will you have to replace equipment in the future? Charter Capital provides commercial equipment financing loans and leases from $10,000 to $1,000,000. In business for over 40 years, they pride themselves on being navigator, consultant, and bridge through the commercial finance market to help you identify the most appropriate equipment financing leads.
Secure business insurance. Business insurance helps to protect the business from financial damages and losses if an unexpected event occurs, including costs associated with property damage, lawsuits, employee injuries, and loss of income due to natural disasters or other unexpected circumstances. Business owners can also purchase coverage that will help them recover financially if their business is forced to close due to circumstances outside of their control. If you haven’t secured business insurance for your company, consider working with Abrams Insurance Solutions. This small group of independent agents is focused on helping people create stable financial foundations in their lives, and especially using insurance to add advantages to businesses!
Invest in cybersecurity. Investing in cybersecurity increases the bottom line because it helps prevent data breaches and other cyber-attacks, which can be expensive and damaging to a company’s reputation. In the face of a recession, where businesses may be struggling financially and trying to cut costs wherever possible, it is particularly important to prioritize cybersecurity as these attacks may become more frequent or sophisticated during an economic downturn. Investing in cybersecurity before a recession can also demonstrate that your business is proactive when it comes to customer security and will give customers peace of mind when they consider engaging with your business even in tough times. That said, many companies have no idea where to start when it comes to boosting their cybersecurity. With over 20 years of experience in technology consulting and IT services, SADA’s security-first mindset is why companies trust them to stay ahead of the curve. They’ll get you on the right track with a comprehensive security assessment, identifying critical issues and applying best practices to help you defend against threats, increase your security posture, and meet your compliance requirements.
Don’t stop hiring. If a recession causes a business’s revenue to decline, having additional staff available to assist in operations will help them continue to provide products and services while decreasing costs. Hiring new staff before a recession can also help businesses prepare for a potential downturn in sales or revenue by providing fresh perspectives on problem-solving. Finally, having new employees on board prior to the start of an economic downturn helps set your organization up for success; when things are back to normal, you’re already equipped with skilled workers who have been trained and have gained experience in preparation for future successes. If you haven’t created a partnership with a recruiting company, consider doing so in 2023! For example, TruPath provides top-caliber, culturally aligned talent for key positions in the manufacturing and semiconductor industry. They’re a dynamic executive search firm with the ability to identify qualified candidates for a variety of roles, with over 15,000 successful placements.
Having a recession-proof business model is key to successful long-term growth. While getting through an economic downturn often requires hard work, adaptability, and fine-tuned strategy, by taking the above steps, businesses can be prepared for any challenges on the horizon.