While no one can predict the future, it's always a good idea to brace for a potential recession. Small businesses are especially vulnerable during economic downturns, as they often don't have the same financial cushion as larger corporations. But there are steps you can take to recession-proof your company. By using the following techniques from the Dripping Springs Chamber of Commerce to shore up your business now, you can better prepare for an economic shift.
1. Skip Layoffs
The first step to recession-proofing your small business is to avoid layoffs. Letting go of employees is not only morally painful, but it can also lead to a loss in productivity and expertise. If you can help it, keep your staff on board—you'll be glad you did when the economy recovers.
2. Make the Right Cuts
In order to reduce expenses, take a close look at your budget and see where you can cut costs. Consider renegotiating contracts with vendors, downsizing your office space, or instituting a hiring freeze. You should also focus on paying down debt, which will lower your monthly expenses and give you more financial flexibility in the long run.
As you review your expenses, if you find that your organization isn’t ideal, then take the time to update it. Not only will it help you to identify your true checks and balances now, but it will help you maintain accurate records moving forward. If you find that you have PDFs that would better suit your new filing system as separate documents, then split the pages with a free online tool. It’s easy to use and can help you create an organizational system that will benefit you and your business for years to come.
3. Set Up Automated Invoicing
One way to ensure that you're getting paid promptly is to automate your invoicing. This means setting up recurring invoices for customers who purchase regularly from you or using software that automates the invoicing process from start to finish. Most of these platforms also include a feature that sends invoices with a payment button, making it easier for customers or clients to pay right away. It will be an upfront investment, but automated invoicing can lead to faster payments and fewer headaches for you and your accounting team.
4. Reconsider Your Business Designation
Another way to strengthen your business is to reconsider your business designation. While sole proprietorships and LLCs offer some protection, UpCounsel warns that they may not be the best choice for your business. C corporations offer greater liability protection and can help you save on taxes. S corporations offer even more tax savings, but they come with more restrictions. Ultimately, the best business designation for your company depends on a variety of factors. However, it's always worth considering whether another business designation could help you save money.
5. Look for New Revenue Streams
In order to create new revenue streams, think outside the box about how you can monetize your products or services. Can you offer subscription plans? Can you create premium versions of your existing offerings? By diversifying your income streams, you'll be better prepared for lean times—and poised for growth when the economy rebounds.
6. Give Your Marketing a Makeover
Make sure that your marketing campaigns are up-to-date and relevant to current economic conditions. If necessary, shift some of your marketing budget into online channels like social media or email marketing, which tend to be more cost-effective than traditional methods like print advertising.
7. Review Your Business Insurance Policies
Finally, review your business insurance policies to make sure that you're adequately covered in case of an unforeseen event like a natural disaster or data breach. Depending on the type of business you have, you may need to purchase additional coverage or update your existing policies.
Plan, Implement, and Grow
By taking these seven steps, you can recession-proof your small business and weather any economic storm that comes your way. Invest in automation technologies, take advantage of free online tools, manage your finances carefully, and don't be afraid to think outside the box when it comes to generating revenue. Recessions provide opportunities for growth if you know where to look for them. Most importantly, keep calm and carry on —your small business will survive and thrive if you do.
Join the Dripping Springs Chamber of Commerce to connect with local entrepreneurs and resources that can help your business grow.
