Times are tough right now. The cost of living and doing business is rising rapidly, there are labour shortages, and real incomes are falling, leaving consumers with less disposable income. All of this makes for a difficult economic environment in which to do business, but it’s not all doom and gloom. There are ways to weather the storm and come out the other side even stronger. Here are three key recession survival tips for small business owners.
#1 – Focus on Cash Reserves
We’ve said it before and we’ll say it again: cash is king.
No matter how well things are going, it’s always important to keep a very close eye on your cash reserves and cash flow. You could be turning a huge profit and still run out of cash, which could ultimately lead to your business folding.
During a recession, it’s even more important to focus on cash flow and make sure you have enough to weather any potential storms. Cash is fuel in your tank – without it, you can’t keep driving.
Having enough cash in the bank gives you the freedom to make strategic decisions, invest in your business, and weather any short-term storms.
Building up your cash reserves will also help you to stay sane, because you won’t go to bed every night worrying about running out of money.
Ideally, you should have enough to cover you for six months in a worst-case scenario – i.e., if all of your streams of revenue completely dry up.
#2 – Focus on Making Your Customers Happy
Happy customers equate to repeat business and referrals, both of which are fantastic news for your bottom line.
When times are tough, people are pickier with their money and they’ll be quick to take their business elsewhere if they’re not happy. This is why it’s so important to focus on making your customers happy.
You need to deliver an excellent experience from start to finish. Your customers should feel welcomed, valued, and listened to. If they’re not happy, you need to find out why and put things right.
Increase touch points with your customers, so you can build up a rapport and get feedback. This could be anything from regular check-ins to survey cards in packaging. It’s also important to let them know what’s going on with your business. If you’re making changes or facing challenges, they’ll appreciate the transparency.
#3 – Work Out What Generates the Most Profit – and Do More of That
This one seems obvious, but it’s often overlooked. In a recession, you need to focus on the areas of your business that generate the most profit, and double down on these.
A big part of knowing your numbers is knowing exactly what makes you money. If you’re not clear on this, it’s time to sit down with your accountant or financial advisor and identify your key profit drivers.
Once you know what these are, you can start to focus on them and do more of the things that make you more money.
Of course, you might have a product that’s selling really well but isn’t generating much profit. Alternatively, you might have a smaller product that doesn’t sell in big numbers but is highly profitable. In this case, you need to start pushing the latter to drive up profits.
Of course, this doesn’t mean you should stop selling your low-margin items if they’re popular enough to generate significant profit due to a high sales volume. But it does mean you should focus more on your high-margin items to really drive up profits.
Small businesses can survive and thrive in a recession by focusing on cash reserves, making customers happy, and knowing what generates the most profit. These three tips are essential for small business owners who want to make it through these tough times.
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