Undoubtedly, there is going to be a long recession in the upcoming days. Your customers will start cutting down their expenses and it’s going to affect you badly. It is not wrong to say that small businesses like yours are often hit the hardest during a recession.
You may want to read this: 3 ways the upcoming recession in India affects your small business
So, if you’re not preparing for the upcoming recession, it is impossible for your small business to survive, and hence you’re preparing to fail.
Being a small business owner, you must make drastic changes in your business to increase cash-inflow and reduce cash-outflow which is the dead-sure way to survive an economic recession.
Let’s get started. Here’s what a small business like you should to save money and survive the upcoming economic recession:
1. Cut down your monthly rent.
Firstly, try negotiating with your landlord to lower monthly rent. Point out that it’s better for both of you if they lower your rent.
If situation demands, feel free to agree for signing a longer lease term in exchange for the lower rent if you have to. Your landlord would rather have you stay at a lower rent than to have space be vacant for months.
2. Find cheaper vendors for all your utilities.
Consider all your utilities like water supply, power, broadband, and phone network. Call your vendors’ competitors and find out if they have a better deal. Let them know you’re willing to switch vendors if they can give you better offers.
They certainly will have unadvertised discounts that they can offer new customers. All you have to do is ask for them. If it works out, call your current vendors and get them to match the offer to avoid the trouble of switching.
3. Reduce unnecessary expenses.
✔ Stop luxury spending.
✔ Don’t waste money on things you don’t need.
✔ Stop buying new things for office needs, buy a second hand one instead.
✔ If you don’t have many clients coming in regularly to your office, consider moving to a location with a lower rent in a decently priced location.
✔ Discontinue giving perks, bonus, extra money to your staff for a while and resume them when you’re business sales catch up.
4. Look for the second-hand or just lease it out.
When you need a new computer or office furniture, lease it instead of buying. Opt for a second hand if it’s in good condition. This way, you can easily save a lot of money. If your business runs out of cash, it won’t matter that you paid less for that desk by paying the full amount upfront.
Let go of luxury things. Especially, in a recession impacted economy, there may be plenty of used furniture, computers and many more from recently closed businesses.
5. Delay your payables.
Having cash-in-hand is critical for your business. Talk to your vendors and see if you can get them to extend your payment due date. When they disagree, see if they will give you a small discount for paying early. You can also consider using a credit card to further extend your payables.
6. Collect receivables sooner.
Offer your customers a discount for paying sooner.
✔ Never give free credit for your vendors during an economic recession. You’re not running a credit card company. Never give your customers free credit at the cost of your survival. During a recession, you don’t have the luxury of floating free credit to your customers any longer.
✔ Make your payment collections on time. Send payment reminders to collect back your pending payments from your customers.
7. Retain your existing customers.
✔ Do not cut down expenses on retaining your existing loyal customers. Make your customers feel good when they do business with you.
✔ If you’re not the cheapest, make them feel that you offer a premier product or superior customer service, remind your customers of the exceptional value you offer — and try your best not to lose them to your competitors.
8. Maintain Customer-relationship
✔ Call, WhatsApp, or send a surprise gift to your best customers.
✔ Tell them you appreciate their loyalty and continued partnership.
✔ Let them know you’re willing to work with them to keep their business.
✔ Sign a long-term contract if the opportunity arises! Buy them lunch or a cup of coffee to make them feel valued.
They find it harder to stop doing business with you when you’ve met face-to-face and they know you care about them the most.
9. Reduce the amount of inventory you’re holding
During an economic recession, it is recommended to not tie up too much cash in inventory? Do you really need to have 50 units of every product sitting on your shelves?
✔ Stock fewer units on the shelves and keep more cash in your pockets.
✔ While you’re considering your inventory, maybe now is the time to liquidate the worst-selling products. Try talking to your vendor, and sell it back to them.
✔ Stock up more of best-selling product and less of worst-selling ones.
10. Reduce your “profit margin”
Your customers spend differently in an economic recession. Bring down prices to drive more demand, but see that you don’t undergo loss either.
Keeping your business in great shape during the current economic condition is difficult, but not impossible. With these steps, you can do 100% better than what you would have been doing without preparing for a recession.
What do you think? Please comment below.
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