Is the U.S. headed for another recession? Two-thirds of America’s business economists project a downturn by the end of 2020, according to a survey reported by Bloomberg—and 10 percent believe it will start next year.
While the economy currently looks robust, it’s always smart to be prepared for a downturn. Here are 10 steps you can take to protect your business from bad times.
1. Assess your risk. Does your industry traditionally get hit hard by economic downturns? If so, does it happen right away, or will it take a while to feel the effects? You want to know how much risk you face and how quickly it could happen.
2. Decide what products or services to cut first. If certain products or services are likely to suffer big declines during a recession, consider dialing back on those now so you don’t get stuck with excess inventory or staff if a downturn hits. Cut back on your personal expenses to build up a financial cushion.
3. Diversify your client base. If your business is heavily reliant on one or two big customers, losing them in a recession could be devastating. While continuing to service the big clients, solicit more work from smaller ones, and reach out to new clients. You can also diversify by looking for low-cost ways to expand to new markets, either geographic or demographic. For example, selling internationally can mitigate risk if the U.S. is especially hard-hit by a recession.
4. Create alternative sources of income for your business.
- If you currently sell in a retail store, can you sell on your website as well?
- Can you develop affiliate relationships with businesses or individuals?
- Can you sell your products or services at local events?
- If you own a service business, are there related products you can sell?
- If you sell products, are there related services you can add?
RELATED CONTENT: The Magic of Creating Multiple Profit Centers
5. Focus on increasing profits. Ask yourself:
- How can you cut costs now—and in the upcoming months?
- Can you find cheaper sources of goods? Online marketplaces such as Alibaba.com can connect you with low-cost suppliers worldwide.
- Can you renegotiate your rent?
- Can you negotiate better terms from vendors?
- Can you renegotiate credit terms with your lenders?
Now is the time to lock in any good deals you find.
6. Pay close attention to cash flow. Monitor your cash flow statement at least weekly. Get proactive about invoicing customers as soon as the work is done and following up on late payments immediately. Double your efforts to collect all monies due.
RELATED CONTENT: 6 tips for better managing your small business cash flow
7. Get credit. Do you have a line of credit? If not, get one. It’s always easier to get money when you don’t need it than when you do. Get some low-interest credit cards, too; you may need to rely on them later.
RELATED CONTENT: Get answers and informaiton about business financing
8. Explore new marketing channels. Test now to see what’s most effective. Look for low-cost ways to reach customers, such as online advertising and search engine optimization. Consumers are becoming increasingly reliant on voice assistants (Alexa, Siri and Google Assistant) to help with their shopping efforts. These require a different approach to SEO. Social media advertising is a great way to reach new customers.
9. Find mentors and advisors to help you. Create an informal board of advisors you can rely on for guidance. Contact SCORE to get free consulting and advice from experienced business owners and mentors.
10. Establish a good relationship with your banker. Do frequent check-ins (at least once a quarter) to let the banker know how your business is doing. Be proactive about communicating both good and bad news. Being honest now will pay off later.
By taking these steps, you can better position your business to weather any economic storms.
(Disclosure: SCORE and Alibaba.com are clients of my company.)
About Rieva Lesonsky
Rieva Lesonsky is CEO and Co-founder of GrowBiz Media, a custom content and media company focusing on small business and entrepreneurship, and the blog SmallBizDaily.com. A nationally known speaker and authority on entrepreneurship, Rieva has been covering America’s entrepreneurs for more than 30 years. Before co-founding GrowBiz Media, Lesonsky was the long-time Editorial Director of Entrepreneur Magazine. Lesonsky has appeared on hundreds of radio shows and numerous local and national television programs, including the Today Show, Good Morning America, CNN, The Martha Stewart Show and Oprah.
Lesonsky regularly writes about small business for numerous websites and for corporations targeting entrepreneurs. Many organizations have recognized Lesonsky for her tireless devotion to helping entrepreneurs. She served on the Small Business Administration’s National Advisory Council for six years, was honored by the SBA as a Small Business Media Advocate and a Woman in Business Advocate, and received the prestigious Lou Campanelli award from SCORE. She is a long-time member of the Business Journalists Hall of Fame.
Bank of America, N.A. engages with Rieva Lesonsky to provide informational materials for your discussion or review purposes only. Rieva Lesonsky is a registered trademark, used pursuant to license. The third parties within articles are used under license from Rieva Lesonsky. Consult your financial, legal and accounting advisors, as neither Bank of America, its affiliates, nor their employees provide legal, accounting and tax advice.
Bank of America, N.A. Member FDIC. ©2018 Bank of America Corporation