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5 small business strategies to navigate this unpredictable economy
Posted by Grace Townsley
April 14, 2023
In this economy, the only thing certain is uncertainty. But that shouldn’t stop your small business from thriving — even as the market contracts.
When times are turbulent, future-focused businesses have the opportunity to be proactive and adaptive at every turn. They can shrink back and fear what may come next, or they can get into position for the monumental growth that historically follows every downswing.
If you want to navigate the unknown with the strength and foresight of a seasoned business expert, start with these 5 forward-thinking tactics for growth-minded small businesses:
1. Be prepared for anything
In volatile times, it isn’t enough to have a single game plan. Especially if that plan is built on best-case scenarios. To protect the future of your company, prepare multiple contingency plans that consider several worst-case situations — like a technology outage, cash flow decrease and major shift in demand.
One way to build effective contingency plans is to conduct a detailed risk analysis of every major area of your business operations. Once you identify your biggest potential vulnerabilities, if the market does take a turn for the worse, you can start building in protections.
Another way to stay prepared is to keep a close eye on industry news and trends. With an eye to the future, you can anticipate trends before they become realities, and adjust your business plan accordingly.
2. Prioritize productivity
When the economy slows, demand tends to follow. And considering global growth is expected to slow from 3.4% in 2022 to just 2.8% in 2023, now is the time to plan for shrinking demand.
While you can’t control exactly how much of your product or service customers will buy this year, you can control how much you spend in the process of making and delivering it. By boosting your productivity, you can increase overall profitability, even as your top-line revenue declines.
In times of volatility, narrow your focus to the activities that generate the greatest value for your business, with the minimum time, cost and effort. That means prioritizing products where you have a greater margin, and pushing pause on products that are still in development or selling at a loss.
3. Watch your cash flow closely
An unpredictable economy is the worst time to face cash flow issues. That’s why every small business should keep a close eye on the timing of their revenue, expenses and investments.
Review your receivables process to ensure you’re closely monitoring incoming payments, and following up on late and non-payments as quickly as possible. You may even consider offering incentives to customers that pay early — further boosting your short-term cash flow.
Another way small businesses can prepare for cash flow disruptions is by continually updating your cash flow forecast as sales and expenses change. In stable times, your business can likely operate effectively using monthly cash flow projections. But in an unpredictable economy where the market can shift by the day, consider accelerating your cash flow monitoring process to produce weekly or daily forecasts.
4. Look for cost savings opportunities
During volatile times, it’s important to conserve as much cash as possible — especially from areas of unnecessary waste. Now is the time to conduct a detailed cost analysis and identify any areas where costs can be reduced. Variable costs (like delivery costs and raw materials) should be reviewed, fixed costs (like rent and utilities) should be minimized, and discretionary spending should be halted, if possible.
If your business relies on inputs from suppliers, this is also a good time to consider negotiating a better rate or a longer payment period to further reduce spending and expand your cash flow.
5. Be ready to rebound
While an unpredictable economy is a challenging time to run your business, the season will pass. But if your business isn’t ready to respond to the quick growth that follows, you can miss your biggest rebound opportunity!
Here are a few strategies to help your company prepare for a rebound:
Stay closely connected to your customers. Watch for signals that they’re ready to buy, such as increased website traffic and greater social media engagement.
Continue innovating. While an unpredictable economy isn’t the time to invest heavily in R&D, continuing fostering new ideas among your teams. When the economy recovers, you’ll be ready to start testing a whole list of new ideas.
Explore new markets. The post-recovery market may be very different from the market you targeted a year ago. As demand picks back up, be prepared to reevaluate your audience — and open to finding a new one.
The economy may be turbulent, but that doesn’t mean your small business has to be.
Navigating an uncertain market can be daunting for any small business. But with a proactive, predictive, data-based approach to weathering turbulence, your business can leave this season stronger than you entered it — and in position for remarkable new growth.
Want more? Escalon provides comprehensive back-office solutions to small businesses to cope with difficult economic situations. Escalon’s services support firms with outsourced accounting, taxes, human resource, risk management and compliance. Talk to an expert today.
This material has been prepared for informational purposes only. Escalon and its affiliates are not providing tax, legal or accounting advice in this article. If you would like to engage with Escalon, please contact us here.
As a professional copywriter in the finance and B2B space, Grace Townsley offers small business leaders big insights—one precisely chosen word at a time. Let's connect!