Small businesses usually run a tight ship, and rarely indulge in frivolous expenses. But when the financial picture darkens, looking for ways to run even leaner can help you weather the storm and survive, even thrive. Here are tips you can use to find ways to conserve resources and help your business during tough times.
Limit Extra Expenses
Some expenditures, such as payroll, are vital to a business. Others are extra that do nothing but siphon a business’s income. Still others may be necessary but could be limited. Identifying and limiting these unnecessary expenses early can assist in preparing your business.
- Rent expenses: could your business operate from a smaller footprint, or perhaps a home office? Rent is one of the highest obligations a business has so cutting costs here is especially attractive
- Equipment expenses: can you sell unnecessary equipment to help your cash flow? For instance, you could consider selling your company vehicle and meeting your transportation needs through a truck rental agency instead.
- Extra office supplies: do you have hundreds or thousands of dollars tied up in office supplies? Inventory your storage cabinets and limit purchases to only those that are absolutely necessary.
Plan, Plan, Plan
Surviving a financial downturn starts with good planning. Developing a business strategy that considers all the possibilities that you can think of can prepare you to make the right decisions. Some aspects that you should consider are:
- Cash flow: reviewing your past cash flows can shed light on what may happen in the future. Consider how other businesses in your industry make decisions, and whether those decisions could help you as well.
- Write multiple business plans: planning for hard times can require multiple business plans that anticipate one of the best ways to plan for a recession. Imagining different scenarios, and coming up with a plan to handle them, can support success.
- Cash reserves: it is entirely likely that your business may lose income or cash during a downturn. Plan for these losses by incorporating a cash reserve into your plans.
- Emergency investors: should your cash flow fail, you may need an infusion of funds to wait out the storm. Identifying potential emergency investors now can give you peace of mind should things go wrong.
- Extra lines of credit: likewise, securing extra lines of credit, or extending the credit lines that you already have, can give you peace of mind that you have access to funds if you need them.
Focus on Customer Service
One of the best things you can do now to prepare for an economic downturn is to focus on customer service. Even during the worst of times, customers are still spending money and hiring businesses and services. However, those people hiring will want to spend their money carefully and will be looking for recommendations for reliability and quality. Focusing on customer service now can ensure that word-of-mouth puts you at the top of everyone’s hiring list.
- Communicate well and often:: communication with your customers is always important, but during economic downturns it becomes essential. Build a reputation for strong communication skills now.
- Be flexible: Being flexible with your business policies may help you retain cash-strapped customers. For instance, you could amend your return policy to allow for longer timeframes or lower penalties to make it more customer-friendly.
- Ask customers to rate your business: if you have a website (and you should), ask customers to rate your business or write a testimonial to post. Future customers take these ratings and comments very seriously.
- Reach out to the community: consider spending what time and money you can in your community. Sponsoring a Little League team or an event at your local school can provide exposure to your business as well as build goodwill. It is also a wonderful feeling to be able to support initiatives and charities that you believe in, so look for a cause that is important to you personally.
There is no guarantee for a small business facing tough economic times, but by following these three steps you can position your company to weather the storm and survive, even thrive, during a downturn.