During a volatile economic landscape, even the most adept businesses can find themselves facing unexpected turbulence. Market fluctuations, shifting consumer behaviors, and unforeseen challenges can threaten established operations and cast a shadow of uncertainty on future trajectories. Here, you will find practical strategies to equip you to preserve momentum during economic downturns.
Simple Ways to Keep Your Business Going in Hard Times
These general tips apply to all
Keeping a small business afloat in difficult economic times is challenging. Unfortunately, there is no set playbook to follow to ride out the storm and right the ship. Every small business is different, and each carries its own risks and rewards.
These differences make copying another company’s turnaround strategy to the letter unrealistic. Still, there are some general strategies business owners can follow to help them stop taking on water and start bailing themselves out.
Look at the Big Picture
People have a tendency to attack the most obvious immediate problems with vigor and without hesitation. That’s understandable and might make good business sense in some situations. However, it is also advisable to step back and look at the big picture to see what is still working and what might need changing. It’s an opportunity to better comprehend the size and scope of existing problems and further understand your company’s business model—determining how its strengths and weaknesses come into play.
For example, suppose a small business owner discovers that two employees are consistently making mistakes with inventory that cause certain supplies to be overstocked or understocked. While an initial reaction might be to fire those employees, it could be wiser to examine whether the manager who hired and supervises them has properly trained them.
If the manager is to blame, that person could be fired, but this might not be the best approach. If the manager’s relationships with existing clientele have a history of bringing in repeat business and substantial revenue, they are likely someone you’d want to keep. Retraining might be a better alternative than termination.
By thoroughly scrutinizing the strengths and weaknesses of the employees, the owner is looking at the issue from a top-down perspective, reducing or eliminating the chance that the problems will recur while avoiding a change that could adversely impact future sales.
Fix a similar kind of lens on analyzing how your product or service fits into the marketplace now, how the economic crisis has affected your customers and suppliers, and all the other key aspects of your business. You need to know how well your business model fits the current environment and forecast what various alternative scenarios of the future might mean for it.
Inventory Your Staff
Payroll is often one of the top costs a small business owner has, so seeing to it that the money is well spent makes sense. This may involve a thorough review of the staff—both when a problem arises and during the normal course of business—to make sure the right people are on board and doing their jobs effectively.
Both small business owners and large corporations tend to be penny wise and pound foolish when they hire the least expensive workers. Sometimes the productivity of those workers may be suspect. Hiring one worker who costs 20% more than the average worker but works 40% more effectively makes sense, particularly during periods of crisis. By constantly seeking resumes and interviews with new people, business owners can make changes to staff when needed to increase efficiency.
Ensure Access to Cash
Small business owners should take steps to ensure that the company has access to cash, particularly in periods of crisis. Visiting a bank loan officer and understanding what’s required to obtain a loan is a good first step, as is opening a line of credit in advance to fund possible short-term cash-flow problems. Establishing a good relationship with a banker is always useful for a small business.
Small business owners should have other potential sources of capital lined up as well. This might include tapping into savings, liquidating stock holdings, or borrowing from family members. A small business owner must have access to capital or have a creative way to obtain funds to make it through lean times.
Start Sweating the Small Stuff
Although it is important to keep an eye on the big picture, a small business owner should not overlook smaller things that may have an adverse impact on the business. A large tree obstructing the public’s view of the business or the company’s signage, inadequate parking, lack of road/traffic access, and ineffective advertising are examples of small problems that can put a big dent in a business’ bottom line.
Considering and analyzing the numerous factors that bring customers in the door can help to identify some problems. Going through your quarterly expenses line by line may also help. Owners should not be checking for one-time expenses here, as those items were most likely necessary charges. Instead, they should look for small items that seem innocent but are actually draining the accounts.
For example, the cost of office supplies can quickly get out of hand if they are ordered improperly. Similarly, if your supplier increases product prices, you should consider looking around for a cheaper supplier.
Don’t Sacrifice Quality
Keeping a handle on costs is crucial in tough times. Owners need to stay on the offensive and get employees on board with changes that are being made. However, be cognizant of not sacrificing quality when making these product changes.
Business owners seeking to improve profit margins should be wary of making dramatic changes to key components. For example, if a pizzeria is going through a dry spell, the owner could seek to expand margins per pie by purchasing cheaper cheese or sauce ingredients. Note that the strategy could backfire if customers become dissatisfied with the taste of the pizza and sales decrease. The key is to make cost and other cuts that don’t compromise the quality of the finished product. Perhaps there is a way to cut the price of takeout boxes or paper napkins instead.
A bad economy can hurt a business in a number of ways. Adjustments to interest rates could affect a business’s ability to borrow necessary funds. People saving their money during a period of economic uncertainty could mean they are spending less and therefore the business has fewer customers. Some sectors may come to a relative standstill if the market falls enough.
A small business can absolutely thrive in a bad economy but it depends on the business and how they are structured, which line of business they are in, and if that business has the ability to make necessary adjustments in order to retain profit or simply stay open.
Companies can cut costs, which is a common thing to do when facing hard times. This can mean laying off non-essential staff or executives taking a temporary pay cut. Companies making a physical product can change their suppliers, while others may opt to use less expensive materials. Businesses can also issue equity or take on additional debt, although those can be quite risky depending on how they are implemented and the long-term effect on the company.
The Bottom Line
When times become difficult for your small business, it is important at that point, more than ever, to retain a cool head. Sometimes, there is a simple solution that may help you keep the business running that you wouldn’t have noticed if you were too stressed or bogged down in tiny details. Being aware of the big picture and making sure you as the number one employee are performing well are the number one priorities during a period of hardship.
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Reference: [https://www.investopedia.com/articles/pf/09/keep-small-business-afloat.asp]
