Can you protect your business from inflation (and the dreaded "stag-flation")?
Steps to ensure your business is able to survive any financial crisis.
The businesses that survived the pandemic were patting themselves on the back. They pivoted or embraced the changes that came and were able to weather that storm.
But many of those businesses used their personal finances or loans to do it, and are leveraged pretty hard. All they had to do was make it until the pandemic was over and all would be ok, right?
Now interest rates are going up and consumer spending is going down. It looks like we are going to have to keep pushing to make sure our businesses are still around next year.
Are you ready for this next bit of turbulence?
Here are some tips to keep your business from dragging you under...
Tip #1 - Be careful with your income
The value of your money is decreasing. It's a fact. Don't risk a lot of bad debt! It can be tough to ask for money from customers who owe you when you know they are struggling. So you may want to scale back the amount of Account Receivables you have out there at a given time. Watch the payment rates. Follow up often. You can even offer a slight discount for prompt payments.
Tip #2 - Review all expenses
When times are lean, a great way to keep more of your money is to review and eliminate any expenses that you can. Review what you are spending your money on. There are likely some expenses you can cut. You may also be able to negotiate better rates on some of your payables. Also, really do some research to determine if you should expand now or wait.
"But you must also ensure that your spending on new initiatives makes sense. For example, this could seem like a time to expand your business, but maybe not. Again, you want more significant cash reserves right now, and how money gets spent needs to have a better than 80% chance of a high ROI. In short, any edge initiative should be carefully thought through in these times." – Wayne Elsey of Forbes
Tip #3 - Focus on what makes the most money
Take a good look at your financials. Which product or service is under-performing? You may want to consider paring back to the best money makers and shelve the others...for now. If the product or service is costing almost as much as you're making on it, let it go. Or find a way to cut the costs for it, without sacrificing quality. Customers will be more understanding about reducing your offerings rather than getting poor quality.
"Businesses can also increase revenue streams by introducing VIP and economy versions of a service they already offer. They may consider a subscription option with added benefits for automatic renewal. Or, even better – assess if there’s a new way they can apply their core competencies to help in the changing economic climate." – Katie Lundlin of CPAPracticeAdvisor.com
Tip #4 - Keep your current customers happy
People are less likely to try something new when their dollars are in short supply. So combat this by making sure your current customers are beyond happy! Show them how much they mean to you by gifting them something free, or use the example in the quote on tip #3. Customer loyalty can help your business stay open in times like these.
Tip #5 - Don't Stop Marketing
When you are looking at costs to cut, your marketing budget should be the last to go. Now is not the time to fade into the shadows! Yes, keep your loyal customers coming back. You also need to keep yourself top of mind in order to keep going. If people don't know about you, they won't buy from you. You may need to change your method of marketing, so take a deep dive and really flesh out what will get you the best ROI. Once you have that, go for it!
You have put your blood, sweat and tears into your business...
Now is not the time to give up! You can survive this economic crisis with a little effort and knowledge.