What is the impact of an economic recession on a small business? And what are the best strategies to implement to reduce the harsh effects of a recession? Well, i advice you read on to find the answers you seek.
The impact of a recession can be very damaging not only to households but to businesses as well. But instead of lamenting over the effect of a recession on your business; it’s advisable you learn about these effects of a recession and prevent your business from succumbing into its deadly claws.
Recessions will always come; whether you like it or not. Just like we are experiencing a recession now caused by Corona Virus. But what will decide if your business will fail or survive a recession is how prepared you are for it. Now how do you prepare in advance for a recession?
The best way to prepare in advance for a recession is to know how recessions affect businesses and put up defensive strategies to counter such effects before it finally hits. Now how does recession affect businesses and how can you control them?
5 Recession Effects on Your Business and How to Control them
1. Customer scarcity
When you have too few customers, consequently; your income suffers as well. The rising prices make customers too picky or less interested in giving you business. Existing customers may also be re-assessing their spending pattern, which results in fewer orders for you.
So what do you do? How about changing your customer acquisition techniques? Have you tried online marketing? This may not be suitable to all businesses but there’s no harm in considering it. Online marketing has many forms and doing your assignment will prove to be helpful in determining which technique will benefit most your business.
2. Ridiculously high credit card debt
Inflation is likely to happen during a recession, which means that your expenses can be higher than normal. If you have been relying on your credit card for payments, you now need to monitor your spending really closely.
This is because losing track of your expenses can surprise you one day when you no longer have enough funds to pay off all your debt. You do not want to have problem with your credit card because a bad rating will not be of great help when you are trying to obtain approval for loans.
3. Increase in cost of utilities
The rising price of food, electricity and gas can put a big dent to your business. This can be especially true if you run your business from a physical location. Increase in monthly bills means lower income. So how do you resolve this? There are so many ways to save money on utilities. One is to cut back on non-essentials.
If the weather does not need for a full blast AC unit turned on, turn it off. If you can turn off the lights more often without making the business operations suffer, then do so. If you can use less expensive packaging methods or materials, please do take advantage of cheaper alternatives.
Re-assess all the nooks of your business. Take a harder look at your books to get deductions. Lessen expenses in every way possible. Make the most out of technology. If you can automate parts of your business, do so. You can also hire contract workers such as virtual assistants to help you be more productive and to allow time for you to brainstorm on how to improve your business.
4. Dwindling cash flow
If you started your business using a bank loan, you might find yourself out of savings to fall back on if you need funds to survive a recession. To control this, have a suitable savings plan, where you can put in some of your income. This allows you to have a backup plan whenever the current downturn happens.
5. Low staff morale
Slow periods mean sadder employees. Why not add incentives and create contests to boost the morale of your sales team? This is the best time to get your creative juices flowing to help motivate your employees. Having motivated employees means increased sales. So, don’t be too stingy with incentives and praises.
Have you experienced a recession before? Have you felt any of these yet? If so, what are you waiting for? Try out the suggestions on how to control the effects of a recession. It might turn out to be a life saver.