How to keep your business alive through the global recession

Our current economic situation is tense. As the word “recession” circulates in the media, it appears that we are in a “will we or won’t we?” debate between those who believe a recession is unavoidable, those who believe it can be avoided, and those who believe it could go either way. Given how difficult it is for financial analysts to predict what will happen, small business owners have little hope of predicting precisely what economic turn the country will take and when. Preparing our businesses is the best option.

Certain businesses are almost recession-proof simply because of what they do or sell. These businesses provide basic necessities such as food, clothing, housing, healthcare, and utilities. Whether you work in one of these fields or not, remember that recession-proofing your business benefits you regardless of whether the recession occurs.

So how do you do it? Here are some top moves to make.

Diversify

Consider what products you could add to your portfolio at a low cost. If you already make soaps and bath bombs, think about adding salt scrubs or body washes. If you specialize in knitted hats for infants, consider expanding into baby blankets.

Consider your market. Is it possible to reach out to customers in various ways? Consider selling your items on a large online retailer such as Etsy, Amazon, or eBay. Check to see if your soaps can be purchased at the local grocery store or if your hats can be purchased at the cute baby boutique. Consider whether there are any customer populations that you are not currently targeting. Consider how customers will access your products. Delivery, business-to-business sales, bulk pick-up, and even subscription services can be added.

Finally, by adding new price points, you may be able to diversify your offerings. If you normally make all leather bags and boots, consider offering a similar line in more affordable faux-leather options (which may appeal to vegan customers — a whole new market!) If you make alpaca wool sweaters, consider making a synthetic version of the same style to appeal to customers who like your style but have a limited budget.

Understand your cash flow

Even if your finances are handled by an accountant, now is the time to sit down with your statements and understand your cash flow. Examine your documents on a monthly basis. You should be able to create a realistic monthly budget based on your previous spending. Create a spending plan based on your findings, including worst-case scenarios. Check in on your cash flow every month and make adjustments as needed.

Consider the purchases you’re likely to make in the next 18 months as you review your budget (sure, the average recession is only 11, but they can last up to a year and a half.) Consider deferring large expenses such as new office space or furniture. Simultaneously, examine your ad purchases and costs to determine which are yielding the highest returns. Remove any that aren’t paying off. Even during a recession, you must continue to invest in your company through advertising. Fading into the background to save money is a sure way to get in trouble. Take the time, in addition to reviewing your budget and expenses, to renegotiate with your suppliers, especially if it’s been a while.

Finally, consider getting ready to open a credit line or apply for a loan. You may never need it, but training for the documents you require takes time, so gather them now. Make sure your financials, business plans, references, organizational charts, and resumes are up to date. Conduct prospect research to identify potential grants for your business or look for loans with the lowest interest rates. Keep them in mind, and be prepared to submit an application if necessary.

Prepare your team

Make certain that each team member does the work that is best suited to their strengths. Make changes if someone is underperforming or if you realize you don’t need an absolute position to complete a specific task. If you downsize, be aware that those who remain may be concerned about their jobs. It is critical to carefully explain the situation, reassure your team of their worth, and offer cross-training or other professional development.

It is critical to keep your employees happy during a recession. Employee replacement is costly both financially and in terms of workplace morale. If your company can handle it, offering remote work opportunities is a great way to keep employees happy. This will allow them to spend more time at home with their families while also saving you money if you can close the office or shop on occasion to save on utilities.

Strengthen your customer relationships

Converting one-time customers into repeat visitors is the best way to recession-proof your business. There are numerous ways to accomplish this, but here are a few of my favorites:

Provide a rewards program. You understand how they work, and you’re probably a part of several. You spend money and get rewards for it, whether it’s $5 off a bag of coffee or a free candle. Customers return because rewards programs make them feel special and encourage them to spend more on each transaction.

Start a subscription program.Did anyone purchase gourmet dog treats from your online store? If that bag of goodies is supposed to last a month, why not give your customers the option of having treats delivered on a regular basis? If you give a small discount, your customer will save money and will not go elsewhere for Fido’s snacks.

Personalize. Make suggestions to customers based on what they’ve already purchased. Offer to curate product boxes. Offer to personalize that expensive dog bowl or bathrobe. Allow for customizing clothing or handbags.

Give your customers a voice.One of the most effective strategies I’ve seen is to invite frequent customers to join a “advisory panel.” Inform them that their input is important and invite them to join, then send them regular surveys to solicit feedback on your offerings. Allow them to submit any suggestions for new products or ways to improve. You’ll not only make your customers feel valued, but you’ll also learn a lot about their spending habits. They might even come up with some brilliant ideas for you.

Offer free samples. We’ve all added extra items to an order to get a freebie, but this strategy works even if the customer doesn’t have to spend a certain amount! Even if they only order one bar of soap, include a sliver of your new solid perfume. If your customers like your current offerings, they’ll probably like your new ones as well, and you might get back-to-back orders.

Be willing to change your mindset

Perhaps a gourmet cotton candy shop is your ideal business. However, during a recession, you must be flexible and adapt to a changing market. Unless you only serve the wealthiest customers, you will almost certainly need to change or expand your offerings. So perhaps you should start hosting children’s birthday parties for a while. If you dislike it, you can always discontinue it once your financial situation improves. If it’s not too bad, you’ve just added a permanent revenue stream.

A recession does not have to be a cause for panic if you stay focused, flexible, and financially aware. This is an opportunity to learn more about your company and be more creative with your offerings.

Money Saving Tips to Survive a Recession

With rising debt levels, volatile markets, and falling oil prices, having some money-saving tips under your belt could be a lifesaver, allowing you to survive a recession if the worst happens.

Unfortunately, we cannot control a recession; however, we can control how we respond to and prepare for a financial recession. Ta
king precautionary measures to protect your finances can make a world of difference, so make sure you take some – or all – of these steps to recession proof your finances before the next financial downturn hits.

Save an Emergency Fund

When the economy begins to deteriorate, our jobs and income may be jeopardized, which is why saving an emergency fund is critical when preparing for a recession. In a nutshell, an emergency fund is money saved specifically for the purpose of assisting you in getting through your day-to-day living during financial hardships.

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Whether your hours have been reduced, you’ve lost your job, your business isn’t making money, or you’ve made some poor financial decisions, emergency savings will provide you with a safety net to fall back on so you can ride the wave and get back on your feet after the recession.

If possible, try to save 3 to 6 months’ worth of your wages so that you don’t have to turn to credit when the economy is down and money is tight. Using credit as a safety net is a mistake that can haunt people for years. Most people do not anticipate the fact that they will need a higher income than they currently have to repay the money (plus interest) that they borrowed during the downturn.

Tough times always last longer than expected, so debts from these times are always higher than expected. Because most people are accustomed to living on their entire paycheque, they do not have any extra funds to repay this debt. To repay the debt at their current income level, they must either increase their income or drastically reduce their lifestyle.

If you haven’t already begun saving, chances are you won’t be saving money during a recession because you’ll be preoccupied with other matters, so it’s best to begin saving before a financial downturn occurs.

Establish a Budget and Pay Down Your Debts

Carrying a debt burden is, well, a burden. And, during a recession, when jobs are scarce and money is scarce, those high debt payments will add to an already stressful situation. So it’s time to assess your financial situation and all of your payment obligations, and devise a debt-reduction strategy.

It can be difficult to cover day-to-day expenses, let alone debt repayments, during a recession, and this can cause your debt to spiral out of control. Carrying large amounts of debt is extremely risky because even minor changes in external factors can affect your ability to pay your debt. Although you may be able to make payments now, a job loss or an increase in interest rates, combined with banks tightening credit limits, could change that.

The first step toward successfully paying off your debts is to create a budget that accurately reflects the money coming into your household and where it is supposed to go. If you aren’t tackling your debt as aggressively as you could be, or if you are adding to your debt, having a budget will help you identify spending areas where you can cut back so that more of your money can go toward paying down your debt. Here are some detailed steps you can take to create a household budget so you can live within your means and manage your money more effectively.

Downsize to a More Frugal Lifestyle

Downsizing and learning to live frugally can be a great strategy because if you can learn to live with less, you’ll increase your savings and won’t struggle to adjust to a new lifestyle when a recession hits.

Living frugally isn’t as difficult as it sounds, and, contrary to popular belief, a frugal lifestyle isn’t about pinching pennies and depriving yourself of pleasures. Rather, it is about making deliberate spending decisions that reduce expenses while having little impact on your lifestyle.

There are numerous ways to begin living frugally. If your family has two cars, consider downsizing to one and taking public transportation. This decision could save you up to $9,000 per year. If you must have two cars, consider trading one of them in for a more fuel-efficient sub-compact vehicle to save money on gas. Consider downsizing your home or apartment, spending less on groceries, and reducing your cell phone plan.

The key is to make sure your cuts aren’t too drastic, or it will be difficult to maintain in the future. Learning to live on less is the key to recession-proof living.

Diversify Your Investments

Diversifying your income is important, but so is diversifying your investments. If you have the majority of your money invested in the stock market, an economic downturn could be a financial disaster if all of your money is invested in one type of investment. As a result, diversifying your investments is critical.

Examine your investment portfolio to ensure that your investments are spread across different industries and even different types of assets, so that when the market falls, your investments are not as affected and your losses are not as severe.

When it comes to diversification, you can invest in a variety of different investment vehicles. Real estate, whether it’s a house, a condo, or even land, is a common investment that typically grows in value over time. Investing in stocks, particularly the stock market index, is a good way to help your portfolio grow, whereas bonds have historically been a good way to generate income. Consider international investments as well, as diversifying into different countries can help to reduce your vulnerability to an economic downturn.

Recession Proof Your Finances by Preparing in Advance

To summarize, having a healthy emergency fund, learning how to adapt to a more frugal lifestyle, and diversifying your revenue sources are just a few money-saving strategies that can help you survive a recession. A recession is something we cannot control, but we can control how we prepare for difficult financial times. Taking preventative measures now to protect your finances in the future can make all the difference. When you know how to recession-proof yourself and your finances, an economic downturn is no longer something to be afraid of. Instead, you can live in peace knowing that, while you can’t control the world, you can control your finances and be prepared for whatever comes your way.