How to Recession-Proof your Small Business in 2022
The idea of going into a recession is a scary idea for all businesses, but particularly for small businesses that may not have the financial security to survive. Many experts have warned that due to inflation, natural gas, and international wars, a recession is inevitably near or already here. It’s important to develop a strategic plan with the goal of making your small business recession-proof. Now is not the time to panic, it is time to plan and mobilize as quickly as possible so that you can survive this economic downturn. Let’s take a look at some strategies your business can implement in effort to become recession-proof.
1. Dominate your core competencies
Understanding what your business strengths are is critical when looking at how you can possibly downsize while maximizing profits. Every business has something that they’re known for being good at and often that is their core product or service. This will be your driving force during the uncertainty of a recession.
If you are a small business, now is not the time to put money into new products and services that have a high-risk potential and an indefinite return on your investment. You should scale your business back or potentially downsize, so that you can focus on your core competencies and primary revenue drivers.
A great way to maximize your profits during a recession without breaking the bank, is to determine ways that you can use your core competencies to generate new streams of income. For example, let’s say you have a manufacturing business that’s struggling to survive on your core services. To bring in more revenue and develop stronger relationships with your clients, you can VIP or subscriptions services to your loyal customers. This is a great way to generate more income with little to no money or effort.
2. Focus on your marketing and branding
You must stay in front of your clients so that you can remain relevant as competition intensifies. You should create a meaningful online presence that exemplifies what your business is and what you represent. What this looks like is up to you and should align with what your business represents. This allows you to create a deeper connection and position your company in a unique way that appeals to your target market.
In 2022, there’s no excuse not to have an online social media presence with a clear and coherent message to your target market. Be personable and genuine because your audience will see if you’re not being authentic. This is important during a recession because when times are bad, people are going to go with companies that they feel they know and understand. Brand loyalty creates endless opportunities for your business.
3. Create a financial plan
The main priority for management is to create a cash flow plan to help you to visualize how much money you have coming in and going out. Take a close look at your sources of income, cash balances on hand, uses of cash, and financial obligations. We do not want to run out of cash! Having a low cash balance on hand is a key indicator that your business is going under and that it’s time to pivot. During a recession, your finances will likely be tight and it’s critical that you understand where your money is going so that you make cuts or additions where necessary.
The next tier in your financial plan is creating and maintaining a budget to ensure that your business is meeting goals. It makes sense to operate within your budget and to not spend beyond your means. But during a recession, it can be difficult to maintain this system as finances get tighter. The best thing your business can do to prevent any financial liabilities is to follow your budget and business operations plans no matter what happens. Pay close attention to the economic market and adjust the plan as needed.
When creating your financial plan, it’s also important to consider creating a business emergency fund, paying down debt, reducing overhead, and looking for any way you can to cut costs or downsize. It’s better to have a thorough financial plan that assesses every part of the business than to have nothing when the recession hits.
4. Training & Development for Employees
In a recession, it’s common to downsize your business and do layoffs. Hopefully, if you’re following your financial and business operations plans this will not be necessary. But a recession is unpredictable. You’ll need to rely on your core team and employees to deliver and perform at a high rate. Your employees are the driving force behind your business, and they give you the ability to remain flexible, innovate, and pivot when needed. Therefore, you need to invest in building their skills through training and development. When times get tough, you will be able to tackle the challenge internally which saves you money! And that’s what we want!
Not only will this offer an opportunity to cut costs bus it also creates a deeper connection with your employees. When employees feel valued at their job, it is proven that they perform better and are willing to go the extra mile if needed. This is important, particularly during 2022, as there is a quickly growing trend of people leaving their jobs. Keep your employees happy!
5. Be patient
It’s easier said then done. It’s hard being patient when you see the economic market crashing and business plummeting with no end and sight. But I promise that your business will make it through the storm. It’s historically proven that the market will bounce back. So, sit back and ride out the ups and downs of this business cycle until we reach the end of this storm. Take this time to plan and strategize for your next move.