In the United States, recessions are a natural part of the economic cycle. While they can be difficult for businesses to weather, they can also present opportunities for growth and innovation. Here are 5 tips for how your business can survive and even thrive during a recession.
- Inventory & Interest Expense Management.
The first crucial point is to properly monitor your inventory levels. Too high of an inventory level will then require you closing out inventories at either cost or substantial potential losses which will have a negative impact on your gross margin. You will want to monitor and maintain the proper inventory levels going forward so that you are able to maintain your existing gross margin percentages.
Almost all business owners are dealing with higher interest rates as the federal reserve has been continuously increasing the prime rate to combat inflation. Companies need to be very cognizant of their borrowing needs and only draw down the minimum funds required to operate the business on a daily basis.
To better plan for the management of the business, it’s recommended that companies do both: a full year cashflow forecast along with a rolling 3-month cash flow projection. While it is customary to do a 12-month projection, it is more appropriate to do a rolling 3-month projection to keep a good handle on constant changes in the economy as it relates to retail performance, interest rates, international politics etc.
Accordingly, if your business is seasonal in nature, it’s essential to monitor your inventory levels to make sure that if any potential adverse developments occur (that cause orders to be held back), your inventory levels are at a sustainable level.
2. Focus on Core Products.
During a recession, consumers and businesses alike are likely to cut back on spending. This means that it’s more important than ever to focus on your core products and services. Identify the products and services that are most essential to your customers and concentrate on improving and marketing those offerings.
3. Expense Management as it relates to Overall Operations.
Right sizing the business as it relates to expense management is imperative. If your sales volume is stagnating or decreasing, it’s vital that you look to right size the expenses, starting with payroll, which represents the biggest aspect of the expenses on the P&L side. However, a detailed review of all other operating expenses may uncover extraneous expenses which can be cut down or eliminated.
4. Embrace Digital Transformation.
In recent years, digital transformation has become increasingly important for businesses. During a recession, it’s even more crucial to embrace digital tools and platforms. This can help you reach new customers, improve your customer service, and streamline your operations.
According to a recent study by McKinsey & Company, companies that embraced digital transformation during the pandemic are more likely to see revenue growth and improved profitability in the coming years. This highlights the importance of investing in digital tools and platforms during tough economic times.
5. Maintain a Positive Attitude.
Finally, it’s important to maintain a positive attitude during a recession. This can be a challenging time, but it’s also an opportunity to innovate and grow. Stay focused on your goals and look for ways to improve your products. Remember that every business faces challenges, and that the most successful businesses are those that can adapt to changing circumstances.
According to recent statistics, a survey conducted by the National Federation of Independent Business found that 60% of small business owners feel optimistic about the future of their business. This shows that maintaining a positive attitude is a key factor in weathering tough economic times.
While recession can be a difficult time for businesses, with the right approach, you can overcome it and come out stronger on the other side.
At Express Trade Capital, we provide financing along with logistics solutions, and serve as your consultant – providing advice including:
- How to structure transactions for maximum profitability.
- How to most efficiently move your goods from pickup to delivery to your customer.
- How to manage cash flow and mitigate risk throughout the various stages of production and delivery.
- How to eliminate bad debts.
To schedule a discovery call and see how ETC can help your business, contact us here ➡️ https://lnkd.in/e84Ti6hg
