Running a business, particularly a small business, takes so much time, energy and attention, that often owners and decision makers pay less attention to the broader economy. Understandably, your focus is on increasing productivity and sales. However, events on a national or global scale can eventually affect you through plummeting sales and reduced access to credit. According to a very recent poll conducted by Duke Magazine Global Business Outlook, two-thirds of the responding corporate CFO's expect a recession before the end of next year. Economic cycles repeat themselves and you can bet that sooner, rather than later, another recession will hit.
If you want your business to continue to thrive through an inevitable economic downturn, avoiding layoffs and maintaining sales and profits, you need to recession proof. This means implementing simple best practices to reduce the impact of an economic decline on your business. Read on for some workable steps.
A Business Loan Helps You Maintain A Good Credit Rating
Recessions are marked by difficulty, or even inability, to meet regular and essential expenses. Late or unpaid business utility bills and paying off suppliers are often the first casualties when a small business feels the crunch of a recession. Tardy and inconsistent payments erode your credit score. This makes it harder to either access credit at all or limits you to loans carrying unreasonable rates and terms. Unpaid or delinquent debts also expose your business assets to risk of getting seized, especially if you used them as collateral.
Take careful inventory of what you owe and to whom. Honestly assess which of your debts pose the most serious threat to your cash flow and continued operation and focus on those first. Your initial inclination may be to negotiate a payment modification with those creditors, but that may be shortsighted. In many cases, changes to your original payment arrangements, particularly when dealing with larger or institutional creditors, will have a serious and long lasting negative effect on your ability to obtain further business, and sometimes even personal, credit. If, after a careful and honest evaluation of your situation, you conclude that you'll need help to handle continuing payments, your best option is to consult a reputable lender - particularly before investing personal savings into your business, which is a dangerous and unwise practice. A business loan helps you pay off those debts, thereby keeping your business afloat and your continued creditworthiness high.
Also, reputable lenders can assist with advice on financial management through debt consolidation and other refinance options you'll still have available because you haven't let late or missed payments damage your credit. Consolidating or refinancing stretches out existing debt, helps maintain and build your cash reserves and gives you the resources to ride out the economic storm.
Cash Flow and Inventory Management
During a recession, money tends to be scarce, even more so if your business deals in non-essentials. Regardless of the nature of your business, maintaining a healthy cash flow allows you to pay your suppliers and other creditors on time and dutifully serve your loyal customers.
A cash flow loan or merchant cash advance offer short-term relief during lean times. Due to the urgency of your situation, they are available quickly and without a lot of red tape or hassle. The boost keeps your business afloat during the economic trough and helps you meet daily business expenses. It also ensures sustained operations and service by maintaining enough money in the bank to avoid compromising on the quality of your product or services.
Funds to Refocus on Core Competencies
A recession is the wrong time to diversify your products or services or try a different offering. Resources are just too scarce. Instead, focus on your fundamental competencies as a business.
Resilience is crucial during tough economic times, so it's imperative that you concentrate on strengthening your brand, reputation, and other intangibles that make you profitable and competitive. How do you identify your core competencies? These are your unique and crucial business offerings that provide consumer benefits from your services or products that sets you apart in your specific market, and which are not easy for your competitors to duplicate.
Refining your brand involves core product or service improvements, streamlining and eliminating non-core items, and reorganizing staff. A business loan offers a quick and reliable source of funds to achieve these goals.
Optimize Relationships with Current and Competitor’s Customers
Recessions hurt your customers too. Customers may find it harder to make full payments, pay on time, or purchase in regular volumes or intervals. You may be tempted to send suddenly recalcitrant customers away to protect your business. Don't lose sight of the fact that even though the cash flow is lower than what you've come to expect, it is still income for you. Get creative with payment plans. Extend payment periods or offer installment options. If you treat your customers right, they'll remain loyal when the storm lifts.
Draw customers from your competition through better customer care services, affordable payment plans, and recession-friendly packages.
In the meantime, your own judicious use of business loans can help you maintain inventory, pay your bills and keep afloat before customers get back on their feet.
Intensify your Marketing Efforts
Even in the depth of a recession, your customers will still want or need your products and services. While it may at first seem counter-intuitive to be spending money when it's so tight, this is really the best time to intensify your marketing efforts. Many of your competitors will be pulling in their horns, leaving a void that you can fill and take advantage of. Marketing, whether traditional or internet marketing, requires funds. When your own cash reserves are stressed during tough economic times, take advantage of your borrowing power. Engage a reputable lender, arm yourself with a solid and feasible marketing plan, and borrow what's needed to fund that plan and put it into action. The return on your investment, particularly when your competition's presence is reduced, will be substantial. Remember, aggressive marketing is what brings new customers through the door. Take good care of them, and they will be back. Your investment today to gain new clientele will continue to yield a return far off into the future,.
The above tips are tried and true and will help keep your business profitable even when the rest of the economy is struggling. Your resilience during a recession will gain you loyal customers, maintain a stable cash flow and allow you to continue operating efficiently while the competition drops from sight. Partnering with a reliable business loan expert, like Kenmore Capital keeps your business recession proof. Set up a meeting today and learn how to protect yourself.