Make Your Business Recession-Proof
We are just entering a slowdown where consumers are experiencing a squeeze due to higher living costs, and this will have an effect on many businesses. You should not wait until the recession hits but take action now, to make your small business recession-proof.
Here is a quick snap-shot of ideas that you should be considering, if you are to minimise the effects of a recession on your business and to even make your business recession-proof.
"Don't wait Until Your Sales Slump Before Taking Action. Implement Some Of The Points Discussed Below, NOW!!!"
1. Optimise Your Sales And Margins
It is likely that your sales could take a hit as consumers cut back on spending. But the effects of the hit can be reduced by an increased focus on sales and margins. Unfortunately, businesses are not just being hit by possible reductions in sales but inflation of input costs, too, which could impact margins. There are still several ways that you can mitigate some or all of this:
Review your product portfolio. One way to optimise your sales is to review your products to ensure they are well matched to the needs and wants of your target customers. The better that they are ‘matched’, the better your sales are likely to be.
Prioritise the sales on your ‘best sellers’. By prioritising the selling of your best selling products, you are less likely to see a large dip in sales. You could even stop selling your poor or weak selling products in favour of the better ones; this could also reduce money tied up in ‘slow or dead stock’.
Prioritise the sales on the products with high margins. Margin is important in a slow-down, particularly if you have to offer discounts to encourage buying. If some ‘best sellers’ also have high margins, these could be the products to prioritise.
Focus on your best customers. For many businesses, 80% of sales can come from the 20% of top customers; these are often the most loyal customers who are most likely to keep buying from you when there is a dip. By prioritising these customers, you could reduce the potential of a dip in sales.
Look for new selling ideas. This could be in the form of new products to new markets, for instance. Falling sales can concentrate the mind and create focus on new ideas for creating new sales. You should, however, be careful that the cost of implementing new ideas is not too costly and there should be a quick return on the expenditure made.
"For Many Businesses, 80% Of Sales Can Come From 20% Of Their Customers, So It Makes Sense To Focus On This Group Of Customers To Optimise Your Sales During A Slow-down"
2. Look To Improve Customer Experience
If you wish to minimise your dip in sales, you must look at improving your customer experience. Having a large army of loyal customers, who keep returning to buy more, will make your business recession-proof, but your customer experience must be no less than excellent.
One good exercise is to plot the customer journey of your target customers, identifying each ‘customer contact point’ throughout the journey from when people first become aware of you to when they make a purchase. Such ‘customer contact points’ could be viewing your social media, visiting your website or making a purchase through your payment system. By considering each ‘customer contact point’, you should try to identify likely ‘pinch points’ where there could be friction and where things are not right from the customer’s point of view. Relevant improvements should be made to such points.
Work to excite your customers. With friction and ‘pinch points’ eliminated within your customer journey, you should go further and excite your customers. Those customers who are extremely happy with your products and the customer experience are more likely to return to buy more, more frequently.
"A Great Customer Experience Is A Sure Way To Get Customers To Keep Returning & To Keep Buying. A Heavy Focus On Continually Improving The Experience Should Help Reduce The Effects Of A Down-Turn"
3. Improve Your Marketing
One way to minimise the dip in sales is to bolster your marketing. Generally, you should double your marketing efforts during a recession, at least.
Review all advertising and marketing and try to assess what works and what does not work. Then, efforts on what works should be intensified, while what does not work should be eliminated.
Review your paid advertising and paid marketing, and quantify what return you are achieving. Low yielding advertising and marketing expenditure should be reduced or eliminated.
Look at your target customer groups and estimate whether your marketing is reaching the right potential customers. It is important your target customers see your marketing, if it is to work.
Increase the marketing to your best 20% of customers and reduce it to the least-best 20% of customers. It makes sense to prioritise the marketing to the customers who are most likely to buy.
Exploit all the free ways to market your business, such as with free social media (Facebook, Instagram, Twitter etc) and free email marketing (Mailchimp) or by using Public Relations, such as local newspapers or local radio stations. Many businesses make the mistake of spending much on paid advertising when they do not fully utilise the free methods.
Review your website and estimate how effective it is. You should analysis your whole site and ask yourself certain questions, such as: What volumes of traffic are coming to the site and to which pages? Where is the traffic coming from? How effective is it at generating sales? Is the SEO working? What is the ‘bounce rate’ where visitors leave before exploring the site? How many buyers abandon the purchase cart without buying? By answering such questions and more, you should be able to establish the strong and weak parts of your website. Then by eliminating the weaknesses, it should be possible to make it work better to create more sales.
Make your marketing smarter by being more creative and more imaginative. Every other business including your competitors will be trying to grab the attention of your target customers, so the better your marketing content, the more it will stand out.
Look at the marketing of the competition and of other successful businesses and identify what marketing works for them. You should then think to copy or adapt these ideas for your business. If these ideas work for them, they should work for you too and pinching ideas from the competition is a great way to generate new ideas.
Work to create ‘Word of mouth’, This is the most powerful form of marketing, and it is the cheapest. It is something you should work to optimise in a recession, as it can bolster sales while saving you money on your marketing. Excited customers (discussed above) will tell others about your business.
"It Is Absolutely Crazy To Pay For Expensive Advertising & Marketing When A Business Has Not Fully Exploited All The Good Free Ways First"
4. Look At Your Expenditure
It is crucial that you review your expenditure and equally crucial you reduce or eliminate non-essential outgoings. High costs is a certain way not to make your business recession-proof.
Look at your inflated input costs. Every business is experiencing inflated costs and it is an obvious thing to say that you should look at how you can reduce their impact. Talking to your suppliers for lower prices is one way and looking for cheaper alternatives is another way. But you must not compromise on quality for a lower price.
Look at your return on expenditure. For every pound you spend, you should monitor your return. Do you get back £3 or £4 or maybe £10 or more? If the return is poor, you should eliminate it.
Look at each cost and deduce if any can be eliminated or the cost reduced by changing to a cheaper supplier. Energy is one big cost to look at. Could a change of supplier be of benefit and could better energy usage be applied in some areas. Employment is another big cost and you should look at how you use your employees and their time.
Check your bank and credit card accounts to monitor outgoing, especially automatic payments that might be going out. Are you paying for stuff that you do not use.
"Most Businesses Are Poor At Regularly Reviewing Their Outgoings & Quantifying Their Return On Expenditure. A Good Focus Could Yield Good Savings"
5. Improve The Productivity & Efficiency Of Your Business
Businesses can be very wasteful in terms of time and energy usage etc. When things are good, it is easy to relax some processes but when things get tough, it is time to tighten everything up.
Look at all the major processes, within your business, to estimate which ones work effectively and try to identify the ones that are wasteful and eliminate these. Only a business that is well run will be a successful one.
Think of time in terms of money and whether you are getting a good return on the time that is spent on tasks and processes, for yourself and your team.
Prioritise the most important tasks that will generate the most benefit for the business and eliminate the wasteful and ineffective tasks.
Look at your employment and assess whether every position is crucial to your business and assess whether some positions could be liquidated or merged to reduce your expenditure.
Look at your planning processes. Many businesses operate without an effective business plan, or some do not use their business plan, once generated. Better planning should mean better profits and is essential for an efficient business. Every part of your business should be well planned and everyone of the team should work to the plans. Every few months, each plan should be reviewed to estimate their effectiveness and changes should be made where necessary..
"Improvements In Productivity & Efficiency Is Always Possible. All Plans & Processes Should Be Regularly Reviewed To See Where Savings Can Be Made"
6. Review Your Financial Position
Businesses usually fail when they run out of money. Even profitable businesses can fail when the cash flow dries up. In times of recession, cash is king if your business is to be recession-proof.
Businesses are generally poor at planning their cash. Looking at the amount of cash in the bank account is not good enough; much cash in the account does not mean your cash position is good necessarily. You should look to plan your cash position and project your cash flow up to six months ahead. By doing so, you should be able to identify periods when your cash flow will be tight. This will allow you to take action to lessen the effect.
Talk to your creditors to ask if your terms of credit for purchases etc can be extended. You should also look at money owed to you and attempt to get debtors to pay more quickly. Both would improve cash flow.
Talk to your bank to ask them to extend your overdraft facility and talk to lenders to maybe negotiate improved terms to your loans, etc.
"Not Planning Your Cash Position & Not Projecting Your Cash-Flow Is Planning To Fail. You Need To Know Now, That Your Cash-Flow Will Tight In 2 Months Time"
Take Action Now!
This is a very quick appraisal of the ‘essentials’ that you should be considering to make your business recession-proof. It is in no way an exhaustive list but probably include the first things you should consider in the present financial climate.
As mentioned before, you should be looking at these areas already and not wait for your situation to deteriorate. It is very difficult to recover from a bad situation, once you are there, so take action now.
Furthermore, what I have described above, are actions and tasks that you should be taking on a regular basis as part of running your business well.
"Don't wait Until Your Sales Slump Before Taking Action. Implement Some Of The Above Points, NOW!!!"
Please Contact Me, If You Have Any Comments Or Questions About This Blog Article. I Would Be Pleased To Help You
Robert Viney Is An Award-Winning Business Coach
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