How your business can thrive even in a recession

How your business can thrive even in a recession

Growth - thriving business during a recession

The pains caused by a recession can be excruciating, which is why most of us dread the thought of it.

A recession can mean layoffs, jobs becoming harder to find, and wages frozen, which means consumers hunker down and spend less – often worsening the economic slowdown unknowingly.

For most businesses, especially small businesses, recessions can be brutal. Just take for example, the Global Financial Crisis (GFC) that struck in 2008. Between December 2008 and December 2010, approximately 1.8 million small businesses shut down. When Investopedia looked into the impact of the financial crisis on small businesses after a decade, they found that business creation has not yet returned to pre-crisis levels.

Now, as the battle against COVID-19 is far from over, global financial markets have been impacted, consumers are tightening their belts, and general demand is falling. All these signs are pointing to one thing: the next economic downturn may just be right around the corner.

We are not here to scare you! Our hope is for you to build a successful, future-proof business; maintaining awareness of the possibility of another recession will allow you to prepare effectively.

In this article, we have tips to help you not just survive a recession, but thrive!

Stay Close to Your Numbers

Without a crystal clear picture of your business’ financial health, you will not be able to create an effective strategy that will help you weather this major business challenge. By making the effort to understand your financials, including your revenue, expenses, profits, and cashflow numbers, you will be able to plan accordingly. Even if you are not a “numbers person”, it’s a great idea to get in touch with your local bookkeeper or accountant, so that they can review your small business bookkeeping with you and recommend accounting software if necessary (We are Xero bookkeepers!)

Improve Your CashflowMan at waterfall - improving your cashflow

Cashflow is the lifeblood of your business, and ideally, you should be bringing in more income than the amount you are spending to sustain your business. However, before you can improve your cashflow, you must first ensure that you have accurate financial records, efficient accounting software and an effective accounting system in place.

Once you have these sorted out, it will be easier for you to take control of your cash position through:

  • Payments from clients – timely invoicing, chasing payments, and offering to restructure overdue payments
  • Reducing your expenses by reviewing software subscriptions, renegotiating terms with your suppliers and lenders
  • Secure financing from government stimulus funds, take on investors, or get short-term financing. However, if you are thinking about incurring debt during a recession, we would highly recommend consulting with your accountant or financial advisor first.
  • Make extra effort in nurturing your relationship with existing customers
  • Enhance your products and services

Check in with us and we’ll help you review your cashflow forecasts. These forecasts will help you conduct best, moderate, and worst-case scenario planning. Doing this will help you make sound business decisions that are based on updated financial data, rather than being driven by emotion, intuition or just guessing!

If you’re keen to get started with cashflow forecasting for your business, click here to download a free cashflow forecast tool.

Maintaining or Growing Your Customer Base

Maintaining your customer base is, of course, essential for the success of your business. However, if you want your business to thrive during a recession, growing your customer base is the way to go! Have a think about who your target market really is and what you can offer that will provide the most value to them. Ultimately, this is what will encourage or entice prospects into buying from you, even during tough economic conditions. You should also research your competitors, identify your point of difference and plan how you will communicate those selling points to interested customers.

We understand that getting more clients during challenging times is easier said than done, but what many business owners fail to realise is that their existing customers are often their best opportunity to make more sales! Keep your customers happy (this will do wonders for your company’s word of mouth), identify how you can add more value into their lives, and reach out to them to take advantage of any untapped sales opportunities.

If you need any assistance with maintaining or growing your customer base, the friendly team at The CloudSitters will be happy to help you map out a marketing strategy.

Rockclimbing at sunset - focus on your strengthFocus On Your Strengths

The concept of “diversification” is usually taken in the wrong way. Simply adding a host of different products and services to your offerings will not magically transform your business. In fact, it may be a waste of time and resources and stop you from focusing on the things that you do best.

During an economic downturn, you should re-evaluate your existing products or services, and focus on your key strengths or core competencies. If you’re selling physical products, this is also the perfect time to re-evaluate your inventory management and adjust based on the products that you want to focus on. Don’t ignore the potential of reducing your inventory costs by only ordering the items and the right amount that you need.

Improve Your Marketing Efforts

One of the most common mistakes of business owners is that whenever they need to minimise their expenses, they automatically cut their marketing budget or even re-allocate it entirely.

Marketing and sales go hand-in-hand. So if you want to keep a healthy flow of sales coming in, you must have strong marketing strategies in place as well.

The CloudSitters Australia Logo

In today’s fast-paced world where consumers are restless, and during a recession where they will become even more careful in their buying decisions, marketing is your tool to help them find and see your products and services as the best options in the market. So instead of quitting marketing, now is the right time to step up your marketing efforts.

Our new business division The CloudSitters was founded in 2020 for this exact reason – to assist business owners to boost their marketing efforts during these strange and challenging times. Services can be customised to your exact business needs and budget. You can request a quote, book a free consultation or download a free social media scheduling calendar to get started.

Don’t be Afraid to Play Offence

Those who go into full survival mode and simply limp through the recession will be much slower to recover! Secure your cash reserves and know when is the right time to play offence. Think about ways to innovate your products and services, streamline your operations to boost efficiencies, expand your market share by improving your offerings to be 10 times better than your competition, and consider mergers and acquisitions.

Never be afraid to reach out to professionals who can help – whether it is your local bookkeeper, accountant, business planner or marketing consultant.

There is No Fool-Proof Way

There is no ‘magic bullet’ when it comes to business, but these tips can make a difference in how you’ll navigate these difficult times.

In the business world, ups and downs are normal and growth stalls due to cyclical reasons are inevitable. At the end of the day, thriving in a recession boils down to having exceptional industry expertise, getting better business visibility, implementing efficient processes and best practices, as well as having a business advisor who can provide you with expert guidance, fresh insights, and timely advice.

The BookSitters Team

Contact your local bookkeeper

What’s next for your business? Get in touch with us and we’ll help you work out a strategic plan.

Our team of friendly bookkeepers are passionate about supporting small businesses with their financial and accounting needs; especially in these current times.

Whether you’re seeking cashflow advice, assistance putting together a strategic plan, bookkeeping tips or assistance selecting an accounting software package such as MYOBXero, Quickbooks Online or Receipt Bank, we can work through it together.

See below for our bookkeeper locations; if you’d like to ask a question, please feel free to use the form below and we’ll be in touch with you soon.

Our Bookkeepers

Justine Day: Southern Highlands / Bowral Bookkeeper
Amanda Graham: Southern Highlands / Bowral Bookkeeper
Petra Austing: Southern Highlands / Bowral Bookkeeper
Karin Evans: Gold Coast Bookkeeper
Pru Hall: Wollongong Bookkeeper
Jackie Short: Canberra Bookkeeper