During times of economic hardship, businesses can suffer from a decline in consumer confidence and decreased sales. Small businesses can be particularly vulnerable during challenging economic times. For business-minded individuals such as local business owners, entrepreneurs, and franchisors, this is an especially important topic of concern. If you have been running your business or franchise for a while, you know that ups and downs are a part of business. Market conditions can change, outside events can affect demand, and sometimes growth stalls simply due to the economic climate. As a serious business owner, having a plan of action during times of economic uncertainty is vital. Business
Protect Your Cash Flow
Cashflow is the lifeblood of all businesses and comes from sources like payments form customers, receipt of a loan, monetary infusion from an investor, or interest on savings or investments. Money is so important for a business that it later becomes the payment for things that make your business run: expenses like employees, rent and other operating expenses. Naturally, positive cash flow is preferred, positive cash flow means your business is running smoothly. On the other hand, negative cash flow is when more money is exiting your business and there is coming in. Money must continue inflowing and outflowing for optimum business health, with the obvious goal being that you bring in more income than you must spend on expenses. Business
Several ways to protect cashflow:
- Know your expenses: Keep a detailed record of your expenses and assess what can be temporarily be done without, this ensures that expenses are kept to a minimum while maximizing the chances of your cashflow being intact.
- Bundle products and services: Even though discounting is not always recommended, adding value is. By creating bundles of products or services, businesses can inject tremendous amount of perceived and tangible value into their offerings for very little cost.
- Cloud accounting software: With a good cloud accounting tool, you can easily keep track of your expenses, you can keep a close eye on your inventory (what has sold and what has not) and all your transactions. You also can know exactly how much cash you have, as well as who needs to pay you.
Win the Competition’s Customers
As a business owner, you must continue to expand your customer/client base if your business is going to prosper in tough times. This means drawing customers from your competition. This does not mean you are going to steal customers, but you are going to provide more value per product than your competition in the hope that their customers go to you because of the better deal. Offer something more or different than what the other guy does. Research your competition and see what you can do to entice their customers into becoming your customers. Business
Make the Most of Current Customers
Current customers can be considered loyal customers in some respects and can give you many more sales opportunities. As a business owner, you cannot afford to ignore the potential benefits of shifting your sales focus to include established customers if you want your business to survive challenging economic times. The key here is excellent customer service. Ensure that your customers and clients love what you do or sell and keep them happy. Which means that the customer is always right. Identify their needs, then meet them. You want to retain their business at all costs.
Don’t Cut Back on Marketing
Many businesses make the mistake of cutting their marketing budget to the bone in times of economic uncertainty, or even eliminating it entirely, but this is exactly when your business needs marketing the most. Consumers are restless. They are always looking to make changes in their buying decisions. Help them find your products and services and to choose them rather than others by getting your name out there. Marketing can be a powerful force multiplier. Business
Rework Your Story and Services
While economic downturns are mostly about money and margins, they are also about narratives. “Growth”, “branding, “prestige”, the words clients love in bull markets give way to words like “ROI” and “savings” in bear markets. A key strategy for you, the business owner, is to rework the narrative around your services. Do not tell clients about growth and brand equity. Instead, tell them about savings, better ROI, and getting more from less effort. Business
For example, if you are selling web design services, you might have two different narratives for different economic situations:
- Growth narrative: Best-in-class, bespoke design services for clients who want nothing but the best
- Savings narrative: Low-cost design services for clients who want more from less
Thus, instead of selling “handcrafted websites” you might pitch clients “heavily customized WordPress websites.” Since your clients are looking to save, your pitch too, should focus on keywords like ROI and affordability. This applies to both new clients and existing ones. With existing clients, sit down with them and show them how you are changing your services mix to save them money. Use off-the-shelve solutions, more affordable components, and cheaper labor. Your goal is to show these clients that you are committed to helping them thrive in the downturn. Business
Clean Up Internally
Businesses can pack on a lot of fat during growth phases. You might hire personnel you do not really need, buy software that remains underutilized, and adopt inefficient practices. An economic downturn is the right time to clean up internally and cut down on costs. This can be tough, especially if you have to let people go. Business
There are two key areas you need to clean up:
Make an inventory of all the tools you currently use. Evaluate their current and average utilization over the last 6-12 months. You will find often that there are tools that are used just once of twice a month then sit unused. Business
- Software contract period (monthly, semi-monthly, annually)
- Contract type (per seat basis, flat monthly, usage-based, etc.)
- Penalties for early closure, if any
In an economic downturn, it can be smart to switch to multi-purpose software instead of single-use tools. Relying on a software platform that can handle accounting, sales CRM, task management, collaboration, and project management tools is a great cost savings tools and can benefit businesses in the long run. Business
Salaries are one of the biggest expenses for every business. Cutting down on this can be the easiest way to keep your business afloat. The first thing you need to know is how well you are currently using your resources.
You need to track three metrics to understand it: Business
- Utilization rate, the ratio of total hours worked to available hours for each resource
- Realization rate, the ratio of total billed hours to total available hours for each resource
- Agency utilization rate, the total utilization rate for all employees divided by the total number of employees
These metrics will tell you:
- How well you are currently using your resources (utilization rate)
- What percentage of each resource’s time is spent on billable work (realization rate)
Surviving and even thriving during challenging economic times is about making tough decisions and judicious cutbacks. As a business owner, you need to go all out to save your best clients. At the same time, you need to realign your practices and make better use of resources. At the end of the day, sustaining a business involves building industry-beating expertise, attracting strong clients, and adopting better software ad business practices. Business
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