Recession Proof Your Business with These 5 Tips!
If the economy takes a turn for the worse, it’ll become more difficult for businesses to succeed. Many will struggle to remain profitable, and others might not be able to stay afloat at all. When this happens, you need to be prepared so you can continue to thrive no matter what’s going on in the world around you. If your business is just getting started, or if you currently operate from home as a side gig with an uncertain future, recession-proofing your business is essential. Read on to learn why now is the time to take action in order to ensure your business thrives no matter what happens with the economy moving forward.
Manage your Cashflow
Every business owner should be monitoring their cash flow every single month. If you’ve never done this before, it can be a bit confusing at first. You should know exactly how much cash is flowing into your business, as well as how much is flowing out. This allows you to spot any problems right away and take action to correct them before they become serious issues. If your cash flow is running low, you need to take action immediately to make sure you don’t run out of money altogether. You’ll want to adjust your expenses, take on fewer projects that cost a lot upfront, look for creative ways to bring in more cash and look at the terms of your debts. If you have consistent positive cash flow, you’ll have more options and less stress overall. The better you are at managing your cash flow, the better prepared you will be for any challenges that might arise.
Manage your Debt
The biggest problem for many businesses is that they take on too much debt. When the economy is healthy, there are plenty of low-interest loans available for businesses to take advantage of. However, during a recession these loans become harder to come by. With fewer people making purchases and industries struggling to stay afloat, there are fewer options for people and businesses who are looking for loans. This means that the interest rates on these loans increase. Managing your finances properly means avoiding taking on too much debt in the first place. It’s important to be fiscally responsible, and make sure you’re not putting yourself in a situation where paying off debts could threaten the survival of your business. If you are already in debt, it’s important to prioritize paying off your loans as quickly as possible or renegotiate with lenders before things get worse. This will allow you to avoid taking out new loans to cover the ones you already have, and give you more options when a recession strikes.
Create some Plans
Every business owner should have a strategic plan in place. A strategic plan is basically a road map that shows you exactly how you plan to achieve your business goals. It’s important to create your strategic plan before the economy takes a turn for the worse. This way, you’ll have time to make adjustments as needed, and won’t be forced to figure everything out in a rushed and panicked state. Creating a strategic plan will allow you to think through your business goals, and identify potential problems that could threaten your success. This will help you foresee any issues before they occur, and come up with solutions for overcoming them. Once you have a strategic plan in place, you should review it on a regular basis to make sure it stays up to date. This will help you remain focused on your goals, and make sure you don’t get distracted by other things that come up along the way.
Be proactive with budgets
If you already have bookkeepers, accountants, or other financial advisors in place, you should make sure they are as prepared as possible for when a recession hits. Multiple, good bad and ugly budgets and planning needed to be ready for any potential issues. Once a recession hits, you will be even more prepared with plans on where expenses or employees need to be with the income you are generating. This means that you will be less stressed when the going gets rough. Making sure your budgets are as prepared as possible will help you avoid any issues and will make it easier for you to work a PLAN when you need it.
Don't forget about the Taxes
When times are good, most people (including businesses) don’t pay much attention to taxes. The vast majority of businesses operate as sole proprietors, and don’t need to file taxes. Unfortunately, this means that most businesses don’t have any way of knowing what their taxes will be until the year is over, and they have calculated their profit. If your business is operating at a loss, you don’t have to worry about paying taxes on it. However, once your business turns a profit, you’ll need to file taxes. In some cases, you may even owe a large amount, depending on how much you are earning. Unfortunately, even if you aren’t filing taxes now, you may still need to prepare for them if a recession hits. You’ll want to make sure you have a plan in place, so you aren’t scrambling to figure everything out at the last minute.
While it’s impossible to know exactly when or how a recession will hit, the best time to prepare for one is now. By managing your cashflow, managing your debts, creating a strategic plan, and being proactive with your budgeting, you can be as prepared as possible for whatever comes your way. If you wait until a recession is actually happening, it will be much more difficult to get ready. Waiting until then to take action means you have less cash to work with, less flexibility when prioritizing which issues you address, and less time to implement solutions before they need to be put into action. In the event that the economy takes a turn for the worse, it’ll become more difficult for businesses to succeed. Many will struggle to remain profitable, and others might not be able to stay afloat at all.
If you need any help with any of the above book a free, no obligation call through my website WWW.PVSBD.ca I will be happy to help you.