Surviving the Recession
If you are a small business owner, it has rarely been a cake walk. But, with the Pandemic still raging, it has been made incredibly challenging. It is more important than ever to get your company financially fit. The basic rules still apply for guiding you out of this financial stress test.
Know the Numbers
We believe that it is always important to know where your money is going. Sometimes it is the little things that can kill your business. Like several unnecessary expenses that seem to slip by on autopay every month. When things get tight the margin for error gets smaller and smaller. Re-examine your expenses, it might surprise you that you have been spending on things you no-longer need in your business. Cut-costs on things that are not essential. You have control over that, so take it. If you are like many other small business owners who wear many hats, you might be doing the bookkeeping yourself, maybe it is time to get a professional. You’ll get timely financial statements allowing you to always see where you stand.
Focus on your core competencies. Whether it is a product or service, you are really good at that, focus on that. A recession is the time to scale back to the goods and services that you know best. Knowing your financial statement, you will see the weaker performers that may need to get put on hold or trimmed altogether. Promote your strength and curtail your weaknesses.
Don’t stop marketing, especially during a recession. Whatever you can do to stay top-of-mind to your customer will help see you through this. Stress is distracting and business downturns are very stressful. It is easy for people to forget about you if they have not heard from you in a while.
If you are worried about cash flow, it might be time to examine your portfolio of assets. Maybe you can get them to improve their performance and increase their return. Do you have excess inventory? Do a promotion and clear that stock. Bring in the cash. Extra warehouse or office space, maybe you could rent it out on a short term basis. You might have some customers who are behind in their payments, maybe it’s time to have that awkward conversation. Arrange for partial payment now if full payment isn’t feasible. Same goes to your vendors. It is better to approach them first and give them a heads up on where you are financially. Chances are they will want to work with you.
Take a real look at your high interest debt. One of the greatest dangers a small business can face during a recession is debt and the interest payments they incur. Take on the highest interest debt first. Letting high interest pile up is never great, but during a recession it can suck the air out of your room. Every dollar you can pay down on principle will free up more cash for you down the road. Maybe it is time to look into a small business line of credit with a lower interest. Apply to small business grants & small business loans to help keep you afloat. Here is a link to the best small business loans and visit the Small Business Administration to learn about their funding programs. The key to acquiring these funds is to get rid of your high interest debt.
Sometimes things change so much that your business may need to change with it. We’re not talking about a dip in sales during a recession, but the possible landscape change. Think of the horse and buggy industry and all the businesses that supported it. In a relatively short time the internal combustion engine made it obsolete. Be open to new lines of business. Being situationally aware could be the most important move you can make. Bad business habits can be overlooked when business is good, but when things get tight, those bad habits could mean the survival of your business is on the line.
Recessions, just like good times, always come to an end. Everything passes in time, so keep on keeping on. Knowing where you are financially can be the most important first step you can take.
We at TYS LLP can help you take a serious look at your business. Experienced at helping small to mid-sized companies refit, rebound and succeed. Give us a call or drop us a line, we welcome a conversation with you.