Online and Brick-and-Mortar Businesses Need to Prepare for Economic Downturns
It’s pretty much a universally accepted truth that recessions hurt the economy. In a recession, there is high unemployment, a lack of confidence, and an overall decrease in spending.
And small business owners are usually the first to feel the effects of a recession and with smaller cash flows, keeping up with payroll becomes a real issue resulting in unemployment. And then, even as a recession recedes, many small businesses fail to recover.
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Make a Plan
Like any business strategy, it has to start with a plan. One of the smartest is to keep a healthy savings account. Cash on hand will allow you to meet payroll and maintain your marketing, which, although it seems counterintuitive, should actually increase during a recession. Most experts agree that you’ll want to put aside one year’s worth of expenses.
By diversifying, you’ll have multiple revenue streams should one sector fail. You can add more products, expand into other markets, or offer more or different services.
If your small business is known for specializing or having a niche, you may want to expand beyond that niche to attract more customers. For instance, if you’re an online food catering business that offers only vegan dishes, you can offer non-vegan dishes, as well, but still keep your primary focus on the kind of food you’re known for.
When diversifying, make sure what you offer has real value for your customer. Their spending ability is lowered, so they need value for their dollar. Next, make certain you have a thorough knowledge of the new service you’re offering. And, of course, make sure your entire team is up to speed on your new business model.
Using Smart Technology
Technology has made all our lives easier, so it stands to reason that it can make your business tasks easier too. It can streamline many of your business processes, saving you valuable time and money.
Invoicing software helps you get paid faster and keeps all your outstanding invoices easily accessible across many of your platforms.
Customer service software allows you to track your customer's buying habits. Good Customer Relationship Management software is the foundation for all your digital marketing.
Cloud computing means you can access all your business data and applications from anywhere on any web-accessible device. Since it’s subscription-based, you only pay for what you need.
Re-Evaluate Your Business Structure
One smart way to save your business money begins with how you structure it. There are two ways to go about it, either forming an LLC or an S-Corp.
An LLC is good for you if you want to have more flexibility in how you pay your taxes and have liability protection for your personal assets. S-Corps offer pass-through taxation, self-employment tax savings, and the option for you to claim losses as tax deductions on your taxes.
Keep Careful Records
Of course, you want to keep careful financial records for tax purposes as well as to apply for loans or ask for lower interest rates.
Other records you want to be sure to have easily available are how well certain products or services are selling and what isn’t as effective. This is also true for your marketing campaigns so that you can use your ad money in the most cost-effective way.
There are online tools that can help you do this in an easy, user-friendly way. For instance, if a lot of your files are in one large PDF, then splitting those into smaller files by using a PDF splitter tool makes it easier for you to find and identify what you need.
If you’re an online business, you’re not immune to a recession. Even though you don’t have to lease office space or keep a large inventory, your customers still have less money to spend, and you’ll have to adjust to stay afloat. By diversifying, making smart marketing decisions, re-evaluating your business structure, keeping healthy savings on hand, and using smart tech, you can be like the thousands of other businesses that have survived economic downturns.
This is a guest post by Eddie Harmon.
Check out his website: Better Biz Tips