Useful tips for small businesses during a crisis or a recession
The overwhelming pressure of the pandemic has made us realise that we need to take some advance measures in order to deal with unexpected situations as a result of a crisis or recession that will greatly affect the business operations.
Here are some tips that might be helpful during a crisis or recession that you can apply to your business:
* Concentrating on the needs of your existing clients or customers
Marketing helps the business reel in new customers, however, during a crisis, it’s better to concentrate on your existing customers. Making them satisfied will naturally make them promote your business without worrying about the extra cost of marketing campaigns.
Knowing the current needs and concerns of your customers will help the business adjust the products or services offered to suit the current trend which can be a recession-proof marketing strategy. By narrowing down your offer to that as perceived as necessary by your target market, you can be assured of their loyalty and ensure that your products or services have a unique value proposition.
Here are some examples of business modification based on the current economic trend:
* Managing your workforce
Flexibility and quick adaptation is the key to survival in the time of a crisis or recession. Ensuring that your employees are given training to cope-up with the fast-changing work environment helps the business achieve their goals during a crisis.
Some businesses mix full-time and part-time workers because the wages increased due to inflation together with all the operating costs of the business.
* Forecasting cash flow
It is essential to think about the business survival in the short-term (about 3 months) to somehow resolve the problem of operational costs as early as possible to lessen the burden of a crisis or recession towards the business.
Here are some things to focus on when forecasting the cash flow:
- Checking income against ongoing expenses. In this way, you can view if your business income is enough to cover the business expenses considering the limitations that a crisis or recession will bring into your business.
- Review the expenses to see which ones you can cut.
- Increase the amount you invested in the business.
Forecasting cash flow will help you in planning the expected revenue, ongoing business expenses, and allowance for any unexpected situation.
When you know your current financial position, it will make it easier to plan the best course of action you can take to get through a crisis or recession.
* Assessing your finances
To know whether it is necessary to secure additional capital, you need to assess your finances:
- Review your receivables to know if there’s any credit risks, if any
- Check if you have any savings you can draw from
After assessing your finances, you can check if the Australian government has provided any small business grants and support programs at business.gov.au. You need to ensure that the working capital remains an asset by having a great oversight on your receivables and payables.
* Review the expenses you can cut back on
You need to ask the following questions to yourself to see your business’ current standing and create solutions to problems faced in a crisis or recession:
- Is there any extra costs you are incurring that can be cut?
- Can you offer new services to accommodate the needs of your existing customers?
Here are some expenses that you can consider cutting back on:
Through making a list of expenses, you can start looking for opportunities to cut costs. It is important to cut cost during a crisis but never compromise the product or service quality as that is the thing that supports your business.
You can reassess your inventory to decide if its good to keep it low or phase out less profitable products that can be replaced to increase the cash flow.
Preparing yourselves in advance is helpful because you won’t be surprised and overwhelmed by unexpected situations.
You can book a Star Strategy meeting with us for a personalised business and tax advice.