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Recession

5 Recession tips for small businesses to sustain and thrive

We are sure. Not a single day had left when you didn’t hear it recently “how #recession will affect businesses” or “how to overcome this economic crisis”.

Moreover, recent studies endorsed that global growth slump from 5.7 percent in 2021 to 2.9 percent in 2022— significantly lower than— the 4.1 percent anticipated in January.

But we aren’t here to scare you anymore. 

It must be all about secure sustainability and embracing stagnancy in the meantime. So we can thrive later when the time comes.

In the blog, we’ll discuss challenges like reduced consumer spending, and slow sales, how to handle them through upgraded solutions, and eliminate even bad scenarios of business bankruptcy.

So, without further ado, let’s dive into it!

5 steps to sustain your small business in a recession 

Recession hack#1 Make a recession-proof plan

To map your #recessionproof plan of action, act proactively instead of reacting. 

You need to adapt fast and “act very quickly” when you see a slowdown in your business, said Baker.

Practically, you have to cut your cost and channelize into something meaningful for your business. Create emergency reserve, save for #contingencyplan against bad scenarios happening. Set aside margins for a certificate of deposit (CD), even a government bond, and maintain at least six months of operating cost in the bank.

If possible, reduce staff or try to shift the remote. This way, you can reduce the pay rate per head after facilitating work-hour flexibility that suits your employees too.

Once you do that, discuss major internalities and mitigate your risk.

Recession hack#2 Reduce Burn rate and devise robust cashflow management 

The rate at which you exhaust your initial capital is called the burn rate.

A good measure would be one-twelfth of the current cash available business. In case you have $300,000 available cash, a burn rate of $25,000 is appealing enough.

To maintain good hands on your cash balances, practice robust cash flow management for your business in this way:

Tight your belt where you can and cut off unnecessary spending

Ask these questions to chop-off unwanted costs and reinvest-

  • Do you have an internal department that you can easily #outsource at a lower cost?
  • Do you need a physical workplace, or can you shift totally remotely?
  • Do your team members regularly use all of your software and tools? You can cut down a high cost on that as well. 
  • Can we renegotiate vendor agreements and suggest more favorable terms such as flexible payment or easy prices on your wallet?

Recession hack#3 Favor your competencies and solidify your offer

Despite your trying and focusing on everything, it’s better to settle for core competencies. Cut the waste.

To employ this method, the best way is delegating and #automation– you can refine your process to become leaner and streamline working factors in your favor. 

Furthermore, create a value proposition for your offer around price (e.g., good price/quality ratio, low price). This will be valuable for your customer and business- it will increase sales even during the recession. 

Recession hack#4 Retain existing customers

Dead businesses will be anchored to the wrong customer.

Simply saying, focus on affluent customers— “more from fewer and less.” Then, cater your product to them. You’ll never run out of money with even a not-so-large customer base. 

According to Bain & Company, Increasing the customer retention rate by 5% boosts profits by 25% to 95%, and Harvard Business Review confirmed that acquiring a new customer is 5 to 25 times more expensive than retaining existing ones. 

It benefits with fewer sales units, thus less fixed cost— and reduced acquisition cost. In the end, a greater focus on high-ticket buyers.

To nourish and flourish your customers– It’s better to prioritize marketing and networking consistently. “Don’t go silent, even if you’re busy with client work,” Garrett said. “Always be talking to people, meeting people (yes, online too), and keeping your funnel full.”

Recession hack#5 Identify opportunities that lie in recession and thrive 

There’s no denial to it- often, bad scenarios come with new gateways to other opportunities.

The recession of 09 came along with the success of Uber, Airbnb, and mobile payment companies Square and Venmo. 

To thrive your business– identify a relevant gap to an audience and fill it for them. Then, keep open eyes to ride the stride with better chances.

Most importantly, stay calm and know that this too will pass. 

How we can help! 

That being said, the Global economy is on a knife edge; it’s better to prepare yourself in advance and ready beer for some losses with it.

But one thing is clear: if you follow the above strategies and devise them accordingly, your business will undoubtedly survive the recession efficiently with minimum hazards. 

We at FinaAccountants, help business firms with #consulting— Our team of professionals provides you with real insights to compute possible risks. It helps to gauge the best strategies to deal with the same. 

Book a call!

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