Preparing Your Business for the Next Economic Downturn

Good cash flow management is a must. Be sure you’re getting invoices out quickly and staying on top of accounts receivable. Automate payment follow-ups. Use software to forecast and manage. Get a revolving line of business credit and/or a small business loan that can help you with cash flow when things are slow. The better you manage cash flow now, the more prepared you’ll be in the event of a downturn.

Cash Reserve

Have a cash reserve. Set up a business savings account for this if you haven’t already. Start working on reducing your debt and expenses now so that you can build your reserve up more quickly so it’s there when you need it. Treat deposits to your savings account like any other expense or bill and make timely “payments” on a regular basis. Automate your savings. You might be surprised how quickly it adds up.  

 The pandemic forced many businesses to find new streams of revenue in order to survive when closures and changes in customer habits swept the globe. While things are largely back to normal now for most consumers and remaining businesses, plan for the next economic downturn by figuring out new sources of revenue ahead of time.

Think about new products you can offer. Are there markets you’re not serving that you could? Are there partnerships you could enter? Do you have extra office space you could rent out? Are there new skills you could learn that would enable you to create new services? There are many possibilities for generating additional revenue if you are open to changes.

Rally your sales team. Ensure everyone is focused on bringing in new customers or clients. Evaluate pitches, strategies, and lead generation tactics. Have regular meetings to keep everyone on track. Consider shorter contracts or discounts. Do what you can to bring in as many new clients as possible.

Increasing efficiency in your operations means that your team can get more done in the same amount of time by making adjustments in how things are done. Doing so increases productivity, which should ultimately lead to more revenue. Take a look at your company’s everyday processes and look for tasks that can be altered or cut out altogether. Are the right team members working on the right tasks? Can you consolidate roles? Are there applications or other tools that can speed things up or make them easier? Can you implement automation or artificial intelligence in some areas to free up employee time for different tasks? The more efficiently your company runs, the better suited you’ll be to meet challenges that lie ahead.

Supply chain problems have plagued both businesses and consumers for the past several years, and while things have improved, it has been a wake-up call that widespread supply chain disruption can lead to huge costs for everybody. To minimize issues during the next downturn, make any needed changes now. Are there weak points that can be improved? Are there local alternatives for suppliers that you could be using? Are there different partnerships that you can benefit from? Do some research and speak with potential partners and vendors about what they’re doing to prepare on their end. 

If you have money saved and have a handle on your cash flow, you are probably in good shape financially. Focus on getting more sales and develop new streams of revenue, and you’ll be even more prepared to deflect financial hardship. Increase efficiency and optimize your supply chain, and on an operational basis, you’ll be prepared for the next economic downturn.

Read more of our business tips for financial advice on helping your business succeed.