Preparing Your Business for the Next Economic Downturn
Businesses are challenged enough in facing the rigors of growth. However, many are not prepared for the possibility of an economic downturn. Businesses must be able to clear many hurdles, but none more challenging than fearful consumers who lose their confidence during periods of economic distress.
Businesses can't rely on standard practices when confronting the unrelenting onslaught of external pressures such as inflation, a contracting economy, and local market instability. They must engage in guerilla tactics to manage their growth through periods of economic turbulence.
Here are four tactics businesses should employ to prepare for the next economic downturn.
While it's essential for businesses to stay focused on their vision and long-range plans, during times of uncertainty, they should increase their focus on the short term to keep ahead of potential contingencies. That's not to say that you should stop planning for the long term—it's vital to keep an eye on all time horizons. It means having more frequent discussions about short-term issues, no matter how minor, so they don't turn into intractable long-term problems.
Short-term issues should take precedence during regularly scheduled planning meetings. It would also be necessary to schedule frequent brief meetings to ensure resources are allocated and appropriately coordinated to address short-term issues.
Getting control of your finances is critical to surviving an economic downturn. Businesses need to be intimately familiar with the expense side of their ledger. That includes building your cash reserve and gaining a clear understanding of the revenue side of the business.
Having an accurate picture of your cash flow reduces the uncertainty in your business. In anticipation of unexpected cash shortages, upgrading your cash management processes would be essential to ensure timely inflows and outflows and maximize cash on hand. It is also time to regularly create and analyze cash flow projections over 13- and 26-week periods. This will enable you to spot trends that can impact cash flow in the future.
Nothing is more fundamental to your business than ensuring your customers are happy.
During a period of market uncertainty, you may have to change several facets of your business, but your focus on delivering excellent value to your customers should never change. It is essential to keep your ear to the ground to know what is going on in your market and what your customers are thinking. Having candid conversations with your customers and prospects is the best way to monitor their attitudes while letting them know you care.
Establishing and maintaining a trusted relationship with your bank can ensure you have a source of capital before the need arises. By meeting with your business bank regularly, you can update your relationship manager on your business finances. You will know the questions you might be asked when it's time to secure a loan or a credit line. They will also be able to provide you with an outside perspective on your strengths and weaknesses.