Thursday, June 20, 2024

How to Keep Your Business Afloat During Hard Times

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For most business owners, 2020 was perhaps one of the most challenging years in recent history. Even if your business wasn’t required to shut down due to state and local COVID-19 mandates, you might have seen a reduction in revenue because people were staying home.

Now, we do have several vaccines being administered, and 2021 could see us return to some sense of normalcy, but you may want to prepare for the next difficult time.

Have a Strong Infrastructure

When you have a strong infrastructure that includes automation when possible, and a core team of employees you can rely on, it’s much easier to weather difficult times. So, for example, consider automating your AP and other financial areas.

Then, you’re already going to have the visibility you need to make smart, data-driven decisions when times aren’t great.

You’ll be less prone to errors, and if you have to make hard decisions like cutting your workforce, you’ll be able to do so without seeing effects on your efficiency and productivity.

When you rely on the right tools and technology and your core staff, you’re going to be more agile even in the face of adversity.

You’ll be lean and versatile, and those are some of the most important parts of keeping your business afloat during a crisis or downturn.

Maintain Your Cash Flow

Often, business owners will focus on profitability too much and not enough on cash flow. It’s possible to go under even when you’re profitable if you’re not keeping a close eye on your cash flow.

Your money has to keep coming in and going out in an optimized way, of course, with the goal being more in than out.

If you’re in a difficult time, think about creative ways to keep a positive cash flow, like increasing your billable services or, if necessary, cutting expenses.

If you’re worried about your access to cash, you might want to open a line of credit even if you don’t yet need it. You want to have access to solutions for short-term cash flow problems as they arise. This can be a time to establish a relationship with a banker, which is something that’ll continue to be useful for your small business.

You can start identifying places to cut operating expenses, although these need to be as incremental and small as possible. For example, start looking at overtime pay and delay any capital spending so you don’t end up in a cash crunch. Downturns aren’t necessarily the right time to invest in your business—they’re about survival.

Prioritize Your Business Over Your Employees

This is a really hard and often emotional scenario you might face—do you put your business or your employees first? If you’re in a crisis or downturn, you’re going to have to make hard decisions, and sometimes those might not be what your employees want, but if you want your business to stay afloat, you’re going to have to prioritize.

Yes, you want to try your best to do right by your employees, but if your business goes under, every employee suffers.

If you are going to have to make difficult decisions that will impact your employees, be honest and transparent with them.

Let them know why you’re doing the things you’re doing.

It may be that you end up auditing your employees when you’re dealing with tough decisions. If you have software and automation tools in place, you can use the data and analytics from those platforms to help you in this area.

For example, is the amount of productivity you’re getting from an employee enough to justify their salary?

What can end up happening if you make changes to your workforce during a downturn is that you come out of the hard times with a stronger team. You have employees who are cross-trained, are loyal, and you can reduce turnover, so even if you’re not facing a downturn or crisis, you’re going to have the best possible employees still standing.

Focus on Delivering Value to Your Customers

Depending on the situation you’re in, you may have fewer customers than usual, and in some ways, you might not be able to remedy that. What you can do is work to provide the best possible value and experience for the customers you do have. Loyalty can carry you through a downturn or difficult time when you’re not necessarily attracting a lot of new customers.

How to maximize the value you offer your customers depends on the nature of your business.

The ultimate goal is that you’re making your customers stop focusing on the money they’re spending with your business or seeing it as an expense and instead focusing on the savings they’re getting by doing business with you.

Along with delivering value and rather than focusing too much on getting new customers, you can also start trying to take the customers of your competitors. The idea is that if they’re going to go somewhere, they should come to you. During downturns, do intensive competitor research.

Keep An Eye on the Small Stuff

As a business owner, you may be focused primarily on the big picture rather than the small day-to-day facets of your business. This isn’t necessarily a bad thing, but in tough times, you need to worry about the small stuff.

These small things can significantly hinder your ability to weather a storm.

The bottom line is that there is no one way to recession-proof your business. What you can do is, first of all, always be prepared for a potential crisis or downtown. You can also use data to drive any decisions you make rather than taking a scorched earth approach as you make changes to your business during a downturn.  

Focus on developing the business you have rather than growing it, and consider the small things that could be costing you big.

Use it as an opportunity to build a stronger foundation for your business so that when you emerge from the storm, you’re better than before.

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