Everyone seems to agree that we are on the verge of a worldwide recession. Whether or not this is the case, the economy is facing difficult times and this will affect many businesses.
However, as a business owner, there’s no need to despair; a recession can be an incredible opportunity for your business. This is the time to really think about how world economics will affect you: what are you going to do, twist or bust?
Whilst it’s true that some businesses do suffer during a recession, others enjoy strong growth. So what determines whether you’ll thrive or dive? Is it luck? Being in the right industry at the right time? Getting a lucky break? Maybe… But we can’t plan and strategise based on luck. It’s not about a roll of the dice; it’s about showing the economy who’s in charge!
Now is the time to take control of your business and do what is necessary to make sure your company not only survives but prospers in the current economic climate.
We’ve spoken about the following strategies before, but this is an ideal time to revisit them. The holiday season’s almost over and we’re heading swiftly towards this year’s final quarter – and then onto 2020. How time flies!
These strategies are things that we should all be doing on an ongoing basis to ensure our businesses are profitable; but, as we are aware, we all get so caught up in the day to day running that we do tend to neglect the simple things.
1. Know your Breakeven Point
Understanding what level of turnover your company needs to achieve to break even is of the highest importance. Remember, “turnover’s vanity, profits are sanity!”
2. Lay down figures
On a simple level, list out all of your business’ monthly costs and then determine what you need to sell in order to break even. This may be trickier or more time-consuming than it sounds, so we have set up a really useful pro-forma spreadsheet that you can use for exactly this purpose. Let us know if you’d like us to whiz a copy over to you.
3. Set targets
Setting targets is really important! Make sure you set and monitor your sales and costs over the course of a whole month, so that you show a profit after your salary/dividends/drawings. And remember that, if you only aim to break even, you will probably lose money, so be careful what you set yourself as a target. Be realistic, but challenge yourself! Our Strategic Business Team are fantastic at helping clients to set – and smash – their targets. They’ll be happy to chat if you need help to pitch it correctly.
4. Look after your cash flow
For the most part, your expenses don’t change, but the amount of cash flowing into your business is never guaranteed. Send invoices regularly and keep an eye on money coming in. If clients are regularly paying you late, deal with this before it becomes a serious issue.
5. Capitalise on your current customers
Expanding your client base is always beneficial, but don’t forget to stay in touch with your loyal customer base. You can potentially increase sales by cross-selling or upselling other services to them, and this is significantly cheaper than marketing to new prospects.
6. Keep an eye on your competition
You should always know what’s going on in your sector and, ideally, how and why your competitors are gaining new business. It’s easy to research what they’re doing by signing up to their email lists or keeping an eye on their social media pages.
7. Stay in credit
Even if you do everything right you could still end up in trouble due to the unexpected nature of business’s financial twists and turns. Making sure you have a good credit score will stand you in good stead if you need to raise temporary funds to keep your business stable.
Although it’s impossible to say exactly what will happen in a recession, it’s always important to make sure your business is in the healthiest state possible, regardless of the UK or world economy. Start by ensuring your financial practices are in order and strategise accordingly from there. The seven steps offered here are simple ones that you can implement yourself, but of course, we are here to help and make the process quicker and less painful if you need us.