How Businesses Can Weather the Economic Storm and Come Out on Top
By Greg Soltes
Revenue shocks and the cyclical nature of the economic cycle can threaten all businesses. In addition, small businesses are particularly vulnerable as they often do not have the reserves to weather times of slowing growth or sales. Implementing the below practices can help mitigate challenging economic times and even allow a business to thrive in times of economic uncertainty.
Cash Is King
Lack of profitability and incurring loss is something that most businesses will face at various points throughout their lifespan. For a small business, cash is extremely important because the timeframe to run at a loss is often shorter than that of a big business or corporation. A well-positioned business will be able to weather a few months of loss while reducing the need for unpaid leave or layoffs if they have saved the cash to do so. The downside to this is your capital will not be working for you, but building some reserves to plan for recession is the responsible thing for most small business owners.
Don’t Cut Back on Marketing
This is an expense many businesses cut during hard times. Yes, looking for ways to reduce expense is a good practice and especially important when the economy is suffering and sales have slowed. However, it is important to also understand that any expense which provides ROI must be maintained as the need to grow revenue becomes more important. A disciplined marketing approach can help alleviate lost revenue and even grow new revenue streams and grow your client base in times when you thought that may not be possible. Cutting marketing costs will decrease search result rankings and once that is gone it can be very expensive to get back.
Make the Most of Current Partners, Customers, Clients, and Vendors
Every business is connected with one another. We all depend on our customers to pay our employees and our vendors depend on us to do the same. In times of economic distress, the vast majority of customers, vendors, and partners we do business with are likely affected. Take advantage of relationships and partnerships by offering to help one another. There are plenty of ways we can be creative to assist our clients and vendors alike to get through downturns, together.
Is your business one of the few to benefit from a crisis? Great – offer to stretch out payments for your customers to help their cash flow. Pay your vendors early. If your business is in a tough spot; talk to your vendors and partners to see how they can help. These are just a few examples of things we can all do to assist one another for mutual benefit in the near and long term.
Secure Capital Before You Need It
Don’t wait until you are in a cash crunch to start looking for financing. Lenders are constantly planning for the next recession and one of the first things many of them will do when it begins is to tighten lending standards. Start now and make it best practice to continue searching for things like additional lines of credit and increasing these dollar amounts in times when business is great and the economy is booming. Make sure to utilize government programs such as the SBA as they often offer better financing terms than traditional lending options and can assist in times of economic shock.
About the Author:
Greg Soltes is the controller for ChoiceLocal after previously working at the Federal Reserve Bank of Cleveland. He specializes in accounting and finance and also has a keen interest in macroeconomics. In his free time, he enjoys coaching youth hockey, traveling, being active, and being a proud dog dad to his rescue pit bull.