Building a business requires a variety of skills, not the least of which is the ability to adapt to changing times. If one thing is a given, no matter what the size of your business or how many years you have been in business, it’s that change is always just around the corner.
Those who learn that truth early on also learn how to analyze trends quickly, weigh options, strategize for various outcomes, and pivot when necessary. They are all learned skills, and they are particularly valuable when facing the prospect of a recession.
Set Priorities; Make Adjustments
If a recession looms, whether you believe it is inevitable or only somewhat likely, there are some immediate steps you should take to minimize damage and maximize staying power. They include:
- Protect Cash Flow: Delay new purchases as long as possible. Lease necessary equipment rather than buying — that’s something American Capital consultants can help you with. Negotiate terms from suppliers; employ hourly or short-term contractors for needed services rather than hiring new employees;
- Build Up Cash Reserves: Give serious attention to what analysts and industry trends predict. This may be a time to form alliances, if possible, with others in the same field. In familiar terms: “Hold hands and stick together” to survive the storm.
- Trim the Fat; Stay Lean: Take early steps to reduce costs and become more efficient. Determine what is best for your business, but you might consider reducing hours of operation, scheduling a clearance sale of seasonal goods and minimal-profit stock, or delaying the introduction of a new product or service until better times.
- Move Your Inventory: Even a slight market slowdown can have serious effect on many industries. If you’re a small builder, a recession is not a time to be caught with spec homes. If you’re a manufacturer, a warehouse full of toys won’t make you happy during a recession. A lower profit on seasonal products or existing inventory beats a fire sale under emergency circumstances anytime.
- Keep in Touch with Current Customers: Create and build good will. Start a newsletter; plan an email campaign. Use social media. Be Creative. Network. Maintain contact, and know that good times will come again.
Plan for Recovery — Now
Use slower times to map out strategies for expansion, or to ensure optimum production when the economy improves. By having a plan in place, you’ll be ahead of the game. Know how to recognize signs of improvement, and when to take advantage of new opportunities.
Keep a close watch on your monthly financials, and be aware of the time it will take to gear up once you give the signal. Meet with financial advisers regularly to develop realistic action guidelines. American Capital Group is celebrating its 25th anniversary this year, and we would like nothing better than to help our clients pave the way to lasting business success. Why not contact us now to discuss options?