Six Tips to Recession Proof Your Business

Six Tips to Recession Proof Your Business

Written by Administrator Monday, 04 May 2009 20:24

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For many of us, it's the first simultaneous recession to witness in the United States, Europe and Japan. The last recession that hit these regions concurrently was during the World War II. Whether it's your first economic downturn or not, the fact remains that this is the worst recession in 70 years. Like every recession in history, it will come to end and growth will resume afterwards.  The economy is like life in that it has its ups and downs. It's important to remember that the economy goes through cycles which are consisted of alternating phases of growth and contraction, and therefore recession is inevitable. Businesses should be well prepared to weather the bad times as well as to be well positioned to benefit from favorable conditions. For that reason, we compiled a few tips on how to make your business fight recession so that it emerges stronger.

 

Observe your cash flow closely. This is considered the main ingredient of the recipe of recession proof business. In these difficult times, it isn't uncommon to see your customers falling behind their payments or seeking more favorable payment terms. In light of the economic hard times, you are more likely to accept this new situation or else fear losing customers in an already bleak business environment. Thus your cash inflow will suffer and there will not be many options to raise cash as financial institutions are reluctant to extend credit to businesses during economic downturns for the sake of preserving loan quality.

 

So, to keep running your business, you don't have an option other than keeping your costs in check. This can be achievable using different strategies like outsourcing to reduce outlays. Outsourcing if done right can greatly save you a lot of money provided that you follow the guidelines of cash management carefully. The reduction in cash outflow will compensate the decreasing inflow providing a cushion for your business. Of course, outsourcing isn't the only strategy there to preserve cash. The economy and personal finance books are full of useful tips that may help you in preparing your business to deal with recession.

The next step is to look at your inventory levels. Remember that in every crisis there's always an opportunity waiting for the right guy to seize it. Recession provides well capitalized businesses with the opportunity to renegotiate with suppliers who suddenly become cash-strapped in these hard times in order to get better deals. After managing your cash flow effectively, it's the time for you to give a call to your supplier.

 

Don't make the mistake of cutting your marketing budget because business isn't doing well. This is considered to be one of the most fatal mistakes made by business owners during difficult economic times. Position your business to take advantage of the next growth phase.

 

For many companies, recession is the best time to go aggressive with regard to acquiring new customers and gaining market share from the competition. Many businesses take defensive measures to weather the recession including cutting advertising budget allowing competitors with deep pockets to fill the gap and win their customers.

 

Don't overlook the importance of having a good personal credit rating. In pursuit of saving their own businesses, many business owners tap their personal credit lines to finance day-to-day operation. This strategy eventually backfires jeopardizing both their income stream and credit scores.