When the future looks uncertain and you see an economic downturn, how can you prepare and strengthen your business? Sounds scary, but it is absolutely possible to thrive even when competition is finding it tough and today we are going to show you how.
The last year has certainly shown us that the future path of your business can change in an instant – usually, due to influences that are far beyond our own control. The Covid-19 pandemic and the ongoing global economic recession have both had a negative economic impact on the business world.
The key in being prepared for such a situation is to have a ‘Plan B’ and to use that to react in a proactive way to the uncertainty that lies ahead. But what elements of your business should you focus on to get your economic downturn ‘Plan B’ ready to act upon?
What to include in your Plan B economic downturn strategy
To keep your business agile and innovative in uncertain times you will need to be resourceful and flexible. Here are some proactive steps to take that will help you create your perfect Plan B combat strategy:
- Enhancing your business financial knowledge – knowledge is power, and being in control of your business data gives you that knowledge. The latest cloud reporting tools, like Fathom and with Xero, help you to understand the financial numbers and forecast the future path of the business, allowing you to make truly informed financial decisions.
- Improving your cashflow – during a downturn, money will be tight and your cashflow position is likely to be poor. To improve this, you need to be proactive about reducing overheads, billing promptly, following up on overdue invoices and making sure that the minimum amount of cash flows out of the business, and the maximum flows in.
- Negotiate with your suppliers – if you can wrangle a better deal from your suppliers, that goes a long way to enhancing your cashflow position. Negotiate with your suppliers to agree on better terms, or cheaper prices, and talk to your landlord about a reduction in rent – or even a rent holiday if the situation is extremely dire.
- Accessing additional funding – when your cash reserves get tight, there may be a need to look for additional funding, or even Government assistance. This could mean asking your bank manager for an extended overdraft, approaching business lenders for a loan, or even looking at attracting private investors or equity firms that may want to pump money into the business – although you’ll need a strong business plan for investors to be willing. The financial elements of this your accountant can help you with (this is what we love to help our clients with).
- Evaluating your market offering – to generate enough revenues to survive, you need your products and/or services to be selling. To that end, it’s worth evaluating your market offering and making some changes. Do some products deliver a much higher return than others? If so, you could make more money by focusing purely on these products and having a tighter and more profitable product range. Here are some extra tips we wrote about for seasonal dips in income, that might help you further when it comes to looking at your products and services.
- Evolving your marketing and sales – communication with your customers during a downturn is vital. Keep them in the loop and let them know that your products/services are still there for them. And reevaluate your marketing channels to make sure you’re hitting the right audience. Is your online presence as good as it could be? Are you providing enough information on your website and social channels to help solve your customers problem? If not, what else could you do to bring in more enquiries and sales.
- Taking advantage of better Search Engine Optimisation (SEO) strategies - where you were currently targeting local or national sales, maybe your SEO strategy can be adapted to target wider, or even overseas markets. Whilst SEO is a slow burn in increasing website traffic, it can make huge differences to refocusing, or new target audience draws. Over a six month period what can feel like a lot of work can turn into a stream of targeted traffic ready to become leads.
- Learning to pivot and diversify – some sectors may tank completely during a downturn – for example, the travel and hospitality sectors were badly hit by Covid. If this happens, you may need to pivot into a new niche or sector to find a new audience and more revenue streams. You can also diversify your product range to meet the needs of a wider range of customers, bringing in more revenue streams and bumping up your cash position as a business (we saw a huge increase in digital products over the last year). Finally, think about where you sell, for example, during Covid there was a spike in online sales, an increase of 36% during 2020, the highest growth seen for 13 years, according to retail association IMRG. Making sure your online presence is up and running is a great way to combat downturns on the highstreet.
Having a Plan B in place is really powerful, when (and if) a downturn hits, because you are then primed and ready to respond often long before the competition gets their act together.
Who plays a big part in your Plan B economic downturn strategy
There are several people you will need to have involved in your Plan B preparations, firstly you are your most important asset here, but secondly your accountant. Your accountant should be a partner to your business, when it comes to financial matters, not just someone you speak to at tax return time. They can help explain what your financial options are and where you can create capital to pivot, or refocus your business.
The second part of that puzzle is your team, they are the people who best know how your systems currently work and how flexible they may or may not be given a pending change. Work with them to establish what your projected route to success would be, so that they can help you build the infrastructure and most importantly sell and deliver your new vision to your clients quickly and effectively.
Talk to us about getting the specific business advice you need
The better prepared you are, and the faster you react, and the more likely it is that you’ll ride out a downturn successfully. If you’re looking to improve your business planning, upgrade your disaster management plan, or improve your financial model, do talk to us.
We are Valued, an accounting consultancy and Xero partner and we are here to help you.
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