Three key areas of your business to focus on during an economic downturn

Although chief economists haven’t officially called a recession, they say it’s extremely likely that there will be a global recession in 2023. And many think that even though economic markers that indicate a recession haven’t been met yet, that the economy is clearly struggling. Prices continue to rise, and layoffs are increasing which all pointing to trouble.

Unfortunately, small businesses tend to be disproportionately affected during recessions. They generally have less resources and cash reserves than their larger counterparts. But you can make it through an economic downturn with some planning.  Here are three areas to focus on in your business to help you shore up in preparation for a recession.

Shore up cash reserves and monitor cash flow.

Cash is vitally important to your business in the best of times. Companies that fail usually do so because they run out of money. During a recession, it becomes even more difficult to keep things running smoothly without the necessary cash reserves to keep the business going.

It isn’t too late to start building up your reserves. Start by determining if there are outstanding customer invoices you can collect on. Determine if you can negotiate better terms with vendors and review where you are spending money to see if you can cut costs and keep money from going out the door.

Your cash flow statement is vitally important and you should review it frequently to understand how much cash you have in your business. Create a cash flow forecast to identify when cash reserves may be low so you can prepare ahead of time.

Focus on higher margin products.

To make it through a tough economy, you may have to take a hard look at your products and services to determine which ones you make money on and which just aren’t doing well. Planning to put resources behind products/services where you have higher profit margins will help you generate more revenue. You might even need to make the decision to discontinue unprofitable products and services.

The goal here is to put your resources behind your money makers so you generate more revenue and more cash for the business. Now isn’t the time for continuing to put money and resources into products and services that just aren’t selling well.

Cut costs.

Everything is more expensive these days and that doesn’t help your business’s bottom line. At a time like this, it’s crucial to understand your costs and where you might be unnecessarily losing money in your business. Making cuts now will put you in a better position with more cash in the bank to face whatever the economy brings over the next year.

Managing your business through economic difficulties isn’t easy but with a little planning, you’ll have the resources in place to make it through and keep your business afloat.

Are you worried about a recession? What things have you been doing in your business to make sure you’re prepared for economic trouble in 2023?

Let us know in the comments!

And if you need help navigating the uncertainty, we can help you figure out where cash is leaking and how to bring more cash into your business. Schedule a free consultation to learn how we can help.

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