OWNING A business can be challenging, let alone during a recession. Thankfully you can take several steps to continue a profitable business during a recession. These include diversifying your sales channels, understanding your cash flow, building strong customer relationships, and keeping a flexible attitude. In addition, precious metals are a low-risk investment that can help protect your business during tough times. We’ll discuss those strategies further in this article.
Key Takeaways
If you only take a few items away from this article, let them be these.
- Business leaders emphasize sales channel diversification to create stability, consistency, and resilience. If you’re relying solely on one income stream during a recession hit, you’re ripe for disruption.
- To survive during tough times, you must understand your cash flow.
- It’s essential to stay flexible and remember that there’s more than one way to build a customer base.
- You may want to invest some of your resources into precious metals. The stock market can lose value as soon as there is talk of a potential recession, unlike precious metals, which hold their value over the long term.
How to Protect Your Business During a Recession
There are many ways to ensure your business weathers a recession storm. Here are some effective methods for generating a consistent income during economic downturn, along with some helpful tips, tricks, and techniques to implement them.
1. Diversify Sales Channels
In an economic downturn, diversification creates stability. E-commerce is no exception. However, most small businesses are under-diversified without even knowing it. That puts your bottom line, business, and team at risk. Healthy and consistent economic activity require diversification.
When figuring out how to get clients for coaching business, or any business, start by diversifying your sales channels (where your customers come from). Businesses should have e-commerce, wholesale, marketplace, affiliate, and offline channels.
What is the ideal mix of those channels? And if you’re not diversified, what are the best ways to get there?
Business leaders emphasize sales channel diversification to create stability, consistency, and resilience. If you’re relying solely on one income stream during a recession hit, you’re ripe for disruption. Even when business is good, small business owners need diversified sales channels. You should add different channels to your business plan when times are good, because once the economic recession arrives, it might already be too late.
Moreover, you won’t have as much market share on a new channel. Any new channel requires commitment and investment. However, getting started is critical to long-term success. The growth of a new channel can be slow, so now is a great time to start. You should determine which marketing strategies to focus on depending on what marketing efforts your business relies most on.
You Might Also Like: Why Should I Start a Business in 2023?
2. Understand Your Cash Flow (Income/Expenses)
During a financial crisis, you might wonder “Why do people become entrepreneurs?” To survive during tough times, you must understand your cash flow. Profit gives a sophisticated summary of a businesses performance, but does not provide an accurate picture of how much money you have to meet immediate expenses that are critical for daily operations, or other debts like credit card debt.
Generally, businesses use accrual accounting, which records income as soon as it is earned or incurred, regardless of whether it is received as money. Gains and losses are not always instantaneous. When working with net 30, net 60, or net 120 terms, your income will appear different than your cash reserves. Insufficient liquidity can leave you stuck.
Here’s why cash flow is important to know:
If you run a clothing company and land a contract with a department store to sell $25,000 worth of products, you must determine your gross profit, which helps you determine your remaining profit. Net revenue minus cost of goods sold equals gross profit. Therefore, 25,000 – 12,000 equals 13,000. Your total profit includes additional operating expenses, such as wages and online advertising.
Net profit is calculated by subtracting operating expenses from gross profit. In this case, $5000 operating expenses are subtracted from $13,000, giving you $8000 net profit. You can then decide whether to expand your marketing budget or accept credit cards to attract new business.
3. Strengthen Your Customer Relationships
At this point, if you’re wondering “Why should I start a business in 2023?“, remember you’re doing it for the customers. Customer relationships need to be strengthened during difficult times, and there are several ways to do it.
Keep a consistent identity. Whenever a company representative speaks with a customer or advertises to them, it impacts them. Mixed messages make customers think you’re unreliable and inconsistent. You build trust when you’re reliable.
A connection can also be emotional. Does Amazon evoke an emotional response in you? I doubt it. Think about how you feel about mom-and-pop shops in your hometown; it’s probably different. That kind of emotional connection comes from a long-term customer relationship. Although small businesses might find it easier, Nike and Patagonia excel at this.
4. Keep a Flexible Attitude
Attitude is the tendency to respond positively or negatively to an idea, object, person, or situation. Individuals respond differently to challenges, incentives, and rewards based on it.
It’s easy to get shiny object syndrome in business when trying out some new approach or program to increase sales or relieve supply chain issues, but it can also lead to tunnel vision. Therefore, it’s essential to stay flexible and remember that there’s more than one way to build a customer base. Consider a different business model when something doesn’t work as expected.
Check This Out: 5 Strategies to Save Your Business from Failing
5. Invest Some of Your Money in Precious Metals
If you’re still asking yourself, “will my business be successful during an economic crisis,” you may want to invest some of your money in precious metals. Why?
The stock market can lose value as soon as there is talk of a potential recession, unlike precious metals, which hold their value over the long term. Gold loses some of its value during uncertain times, but unlike stocks, which continue to go down in most cases, the good news is that gold will start going back up in value. That’s when it’s a good idea to sell and make a little money. The federal reserve sets higher interest rates, which affects the economic climate, but not precious metals. However, economic and trade policy, national debt, and central bank monetary policy can still affect the prices.
During a Recession Business Must Continue
If you’re interested in more information on this topic, we recommend you read these books. Books can build your knowledge and help you look at things differently. And they might even help you put on some serious growth in the coming recession …
- Strengthen Your Business: Fail-Proof Strategies from the Man Who Has Rescued 77 Businesses
- The Nuclear Effect: The 6 Pillars of Building a 7+ Figure Online Business
- Leading Through Inflation: And Recession and Stagflation
That’s what you need to do to protect your business during a recession. The U.S. economy may not be at its best, but if you follow these steps, your business will survive the next recession and thrive even more than it did before it started.