Every business—big and small—is never more than a breath away from economic hardship. Facing an unexpected downturn is a dreaded day for all, but they are a fact of life. Small businesses will be hit hardest when the numbers go south. But there are ways to mitigate the effects.
Remember, there are different kinds of economic downturns: some you can prepare for and others you cannot anticipate with any degree of accuracy.
Among the downturns you can prepare for, you should always take account of seasonality and new trends. If your business is most active only at certain times of the year, you must factor that seasonality into your projections. Likewise, new trends will come and go while some others will stick.
However, there will occasionally be earth-shaking events that will signal deeper economic hardships that no one could have predicted. Events like 9/11 and the global financial crash of 2008 caused huge economic ripples that moved the world.
Keeping your business afloat during an economic slowdown requires creative thinking and laser focus. You may hear platitudes like “go lean,” and “cut costs,” but what does this advice mean for you? Results may vary, but there are a few time-tested tips you can rely upon. Some of these actions must be taken today while others can be filed away for future consideration. A blend of in-the-moment action and future strategy will help you weather the storm today and protect yourself in the future.
If you are in the midst of an economic downturn, it’s time to shift into action mode. There are important, decisive actions you need to take now to keep your business afloat.
But remember to keep cool. Economic slowdowns happen from time-to-time. Once you have managed the day-to-day operations, you will be stronger and feel more confident. Then, you can start thinking about how to protect your business in the future.
Making Payroll In The Short Term
When an economic slowdown occurs, the first priority for most businesses is payroll. How are you going to pay your employees who create so much value for your company? With limited funds, the regular payment of your team members can become a source of stress.
Part of your strategy may depend on what kind of business you run, but in most cases, these strategies may provide some time to make alternate arrangements.
Consider deferring payments. Your employees depend on their income for their basic needs. The thought of going without a paycheck is likely to cause greater stress. In a time of great constraint, it’s your job to provide not only financial support but strong leadership as well.
As an alternative to asking your employees to go without a paycheck for a few weeks, consider reducing work hours and deferring partial payment until after the slowdown has resolved.
For example, if your employees work a five day week, you could reduce the schedule down to three days and pay back the difference when funds are available. In this scenario, the reduced wage is like a forced savings that the employee will collect on after the economy is back on track.
Consider taking a low-interest business loan. Even though cash flow may dry up during an economic crunch, your business still retains its intrinsic value. So it’s likely you will be able to take on a loan to get by through the crunch time and pay it back when cash is flowing again. Or, if you currently have a line of credit with your bank, check and see if they would extend your credit during this time.
Shifting Focus In The Storm
Economic downturns are always painful, but for many businesses who are able to weather the storm, new opportunities can emerge.
In what ways can your business morph to meet different demands or serve a different need?
After the recent COVID-19 outbreak caused serious constraints for public gatherings, many live entertainment venues partnered with virtual technology vendors to bring live events to the Internet. Remote deals and promotions have also expanded. Likewise, restaurants have continued to serve their customers via take-out or “non-contact” services.
Without a virulent pandemic, many of these businesses might not have experimented with these alternate arrangements.
Don’t Stop The Marketing
Review your marketing channels and focus effort where you get the most engagement. When the economy is tanking, it’s easy to lose focus on your marketing efforts.
But don’t forget, marketing is all about how the customer sees you. If they don’t see you, they’ll forget about you.
More than likely, your customers are facing their own challenges and constraints during this difficult time. So take the opportunity to reach out and let them know you’re still taking care of business.
Where do you get the best engagement? Email? Social media? YouTube? Don’t let the economy stop your marketing efforts. Sending out a well-timed message, with just the right wording, can provide your customers with a sense of confidence in your product and the current situation.
Times like these require us to get creative, and your customers may surprise you with innovative ways to serve their needs.
So far, you have taken a holistic approach to keeping your business dynamic and functional through a rough period. Well done. Now it’s time to think about tomorrow. Economic slowdowns eventually end, and business resumes at its own normal pace. What will you do to strengthen your business for future dips in the market?
Investigate New Integrations
Consider how you can re-integrate. Companies that are “vertically integrated” take on more control of their production pipeline by integrating services typically covered by other companies.
For example, if you make a food product, you have likely contracted a separate company to do the packaging. What if you could package the product yourself? This kind of integration, of course, requires a greater investment than you could cover during an economic downturn.
But, remember that the downturn will not last forever. If a vertical integration could help you out during a future slowdown, then you might want to pull out a pen and paper and do some math today.
If you find yourself without an emergency fund in a time of crisis, you’re not alone. Like most people, businesses live “paycheck to paycheck” as well.
Having a healthy emergency fund is simply not a priority when other expenses need to be met.
But, take a moment to imagine the possibilities. What if you had 3–6 months of business expenses available as liquid assets? What a world of ease that would be.
Unfortunately, emergency funds are rare, and it does you no good in hard times to say if only. But, if you have a pen and paper handy it wouldn’t hurt at all to do some math and figure out how long it would take (during normal business operation) to save an emergency fund. It might take years to get there, but just imagine how helpful it would be in times of struggle.
It bears repeating: economic downturns are temporary. It will eventually pass. Now is not a time to count sorrows, but rather to look ahead. Historical trends indicate that markets come back with great ferocity after economic slowdowns. For now, stay focused on keeping the day-to-day operations afloat while looking forward toward new opportunities for growth.