Does your business have a recession game plan? While no one wants to envision a less than favourable financial future, all business owners must plan to help them navigate if (and when) the economy experiences a recession.
According to Investopedia, in its most basic definition, a recession involves a widespread and prolonged economic activity and performance decline, often lasting six months or more. While there can be several reasons why a recession occurs, its common causes include a rise in inflation and a decrease in consumer spending. As a result of circumstances such as rising interest rates or a decline in consumer confidence, many business owners are experiencing losses, such as a decline in sales due to a decrease in demand.
According to RBC, Canada is set to have another recession in 2023 that they anticipate will be “short-lived” and “can be reversed once inflation settles enough for central banks to lower rates.” Nonetheless, the jobless rate will rise again by about 1.5% to reach 6.6% next year, with effective interest rates and inflation increases.
Preparing for such an event is essential but not always straightforward. We will explore five areas your company can study to prepare for a recession (regardless of expected severity). A note for all, remember there is no universal technique for surviving a recession. Every firm is unique, and the planning process must be tailored to your company and its staff.
Improve Client Relations
While your business may be focused on acquiring new clients, you should not neglect your current customer base. In times of economic uncertainty, enhancing and deepening connections with existing clients will improve the possibility that they will commit to your firm.
Do you currently personalize your customer’s experiences on your website and marketing? A study done by SmartInsights found that 63% of consumers will stop buying from brands that use poor personalization tactics. For an experience to be personalized, businesses should first tap into the wants and needs of their current customers. Doing so can improve your business now and during a recession, as customers will feel a personal tie to your business.
You can achieve this by reviewing the purchasing habits of your long-term and loyal customers. What are the commonalities? Are there any consistent trends? From that review, consider some ways you can continue to nurture these relationships. Discovering ways to establish this now will help in the long run. Something like a loyalty program can help retain customers and offer benefits to customers who stick by you.
Invest your time and energy into these customer relationships now, as they can help you weather economic instability.
Tip: With the HubSpot and Acumatica integration, you can extend marketing automation and connects lead generation to sales. Using this tool, you can map HubSpot data and import qualified leads without manual follow-up.
Optimize your business plan
While you have time, examining how your organization functions and what can be done to optimize and streamline processes to increase productivity is pertinent. Not sure where to start? We can help you with this review. Benjamin Franklin summarized it all when he said: “Failing to plan is planning to fail” now is the time so that you and your staff are not forced to scramble to find ways to streamline your business procedures during a recession.
Depending on the nature of your business, this might take several forms, but improving your visibility into crucial business areas such as operations, finance, sales pipeline, inventory management, and human resources is an excellent place to start. How does your inventory stack up against your present and anticipated orders? What is the current workload of your staff, and can you manage more projects with your current staffing? Determine if some items and services are not making enough profit while you investigate the inner workings of your organization. This may need more in-depth business study, but identifying what is unprofitable currently will save you time, energy, and money that you may invest in alternative revenue streams.
Additionally, look for ways to increase the efficiency of routine procedures. Can a process be automated? Do you need to do this additional time-consuming step? Determine strategies to streamline your and your team’s workflow.
Cash Management is Key
As a business owner, saving money for a “rainy day” may seem impossible when you need to invest it. A cash reserve can help you cover expenses when revenue and profit are low. Some business owners want up to three to six months in a cash reserve, while others wish longer or shorter. Start saving what you can now. Cash flow is one way to do this. Determine your expenses, cut overspending, negotiate with suppliers, etc.
Invest in Tech
It’s tempting to think of a recession as a time to lean and play it safe. Recessions, on the other hand, encourage the adoption of new technologies. Investing in technology can help you save money. Companies should prioritize “self-funding” transformation projects that yield quick returns, such as task automation or data-driven decision-making. Another reason is that IT investments make businesses more agile, allowing them to deal with the uncertainty and rapid change that comes with a recession.
Inform your employees
A recession affects owners and employees alike. Economic uncertainty can be stressful for employees who don’t know what to do next or if they’ll lose their job. It is imperative to create opportunities for open communication about the position of the business and if there is any potential for job loss. Where applicable, consider including your staff in your recession preparations by telling them what could happen. This collaboration can strengthen your recession strategy and provide insight and suggestions to help all involved.
Your company should start preparing for a recession immediately. It sounds trite, but today’s actions can affect tomorrow’s business outcome. If you are not sure where to start or if you want a review of your current tech and processes reach out to us today.