How to prepare your business for a recession
There’s no doubt you’ve heard the latest commentary on the pending global recession. With the coronavirus threatening almost every industry, major countries in lockdown, the stock market plummeting, there are plenty of experts warning that a global recession is likely. But what does this mean for your business? Can you prepare your business for a recession? At Bsale, we were curious and researched some information around this. This is what we found.
Be proactive, not reactive
As we mentioned above, the signs are there. The experts have come out in forces saying this is a probable outcome of the current economic climate. The best thing to do is be proactive, rather than reactive. Now is the time to consider this a possibility and put measures in place to minimise the impact should a recession hit.
Get your finances in order
We’re not talking about your loans and credit cards, we’re talking about ensuring our invoices are up to date, your terms are within reason - perhaps even reducing the number of days you request to get paid. At this time, businesses will be worried about their cash flow, so it’s important you do what you can to ensure yours is as consistent as possible. If your contract and terms of payments needs revising, now would be the time to do that.
Check supplier payment terms
Just as you’re checking your payment terms are reasonable and line-up with your cash flow needs, it makes sense to do the same with your suppliers. Ensure you’re across all payment terms for suppliers and any that may be of hindrance to your cash flow, or impossible to meet, contact the supplier and discuss if there are any options available to you.
Your rainy day pile
We all wish to have a cash reserve that can be used for a ‘rainy day’. This may just be that time. If you have the funds available, be prepared to dip into this reserve should you need it. If you don’t, look at ways you can minimise your expenses and start saving money for necessities that might become paramount over the next few months.
Stocktake
Now we’re not talking about stocktake from an EOFY point of view, but rather a way to optimise your inventory stock levels. Ensuring you don’t have too much, or too little of products on hand is vital to get you through the other side of a potentially slower business period. Having too much stock can reak havoc on your cash flow, and not having enough means you could miss out on valuable sales. It’s important you look at your numbers and see what needs to be topped up, versus what you can afford to reduce (for now).
Revisit products and services
Do you have products and services that you know aren’t performing as well as they could? Revisiting your product and service line up is crucial to cutting the dead weight through the period of a potential recession. It doesn’t need to be forever, these items can come back onto the business agenda when the market lifts, but focusing on profit should be key.
Don’t forget to market the business
It’s an obvious thing to consider cutting the budget on sales and marketing when cash is king. But most experts will recall that from previous recessions, investing in sales and marketing during a market downturn could be the difference between keeping your business afloat or not. It can be a catch22 when a business is seeing a sales downturn, to switch off marketing, therefore resulting in a deeper hole of sales.
At Bsale, we encourage you to do research, speak to experts and seek your own independent advice before making any decisions directed to your business.
