A recession can be pretty damaging to any business, especially newer small businesses. After all, in a recession, clients and customers might be spending less even as business costs go up. As Kavan Choksi Japan says, even if it is not possible to accurately predict the onset of a recession, it is vital for business owners and leaders to pre-emptively prepare for one. They need to take certain simple steps to ensure their business is stable enough to survive an economic crisis.
Kavan Choksi Japan marks a few practical tips that can help prepare a business for a recession
Even though typically different countries and industries slip into recessions at different times, the potential of such an economic crisis impacting a business is always prevalent. With several economic, political, and trade uncertainties looming over, it would be smart to have a recession preparation plan in place. Here are a few ways a business can prepare for a recession:
- Concentrate on the customers: During times of economic crisis, the businesses that are able to comprehend and satisfy the needs of the customers are the ones to succeed. It is not always about lowering prices. Business leaders should rather focus on improving customer service and providing more value for the money of the customers. Even during a recession, most customers would be ready to pay for an improved experience.
- Keep an open line of communication with clients: As business leaders think about a recession coming their way, so do the clients they cater to. Hence, companies must try to stay connected with their clients to make sure there is an open line of communication in case things go wrong.
- Optimize cash flow: To deal with an economic crisis, business leaders need to try to make sure that their cash inflow stays constant, by increasing cash reserves and reducing expenses. It would be prudent to have a three- to six-month cash reserve for expenses. Cash flow optimization requires cautious expenditure management and early invoice payment.
- Establish creditworthiness: To establish creditworthiness, businesses should ensure timely payments to creditors, with early payments and debt payoffs being even better. This practice will enhance the business’s credit score, making it more attractive to creditors. With a solid credit score in place, businesses can begin negotiating for longer payment terms, discounted terms, and even larger lines of credit. Renegotiating credit terms before any economic downturn is a prudent way to be prepared for potential challenges.
- Improve the SEO of the company website: Improving the search engine optimization of a website does take a good amount of time and tends to operate with a cumulative effect. Any company that is not already investing in improving its SEO is likely to be already behind the competitors. Recessions, however, do provide businesses with a chance to gain ground or surpass the competition should they pull back on their marketing and online presence.
As Kavan Choksi Japan mentions, during economic crises like recessions, businesses often have to do more with less. This can mean exploring ways to streamline operations and get the most out of the employees.
