When the stock market collapses, all businesses, big or small, are affected. Unfortunately, there’s no way of telling when these kinds of things will occur and when one will end.
Small businesses, in particular, are vulnerable to a changing economic trend. With lesser resources, it can be difficult for them to control the reins of their business. This makes business funding options like inventory loans even more important to them. Without a valuable resource like this, many would be forced to close their doors and declare bankruptcy.
The good thing is, many businesses survive a long recession. As a business owner, you need to carry out specific changes to your business if you want your business to survive. Whether it’s to control spending or downsizing, when an economic upheaval happens, you need to be prepared for what’s to come.
Here are some tips to keep in mind when preparing your business to survive an economic downturn:
Prepare for the Worst
When an economic crisis happens, it will usually take a while before things return to normal. Before things hit rock bottom, it’s always best you prepare your business for any and all eventualities. This way, you’ll lessen your losses and will still have something left to see you through once the economy makes its way up again.
Build your cash flow, customer base, and get the most out of your current customers. With good preparation, your business can survive, and even thrive during a recession.
Control Your Inventory
During an economic downfall, it’s expected product demands will decrease. As a result, you might have to tighten your control over your inventory, especially if you’re a product-based business. The last thing you want is to tie up your cash on inventories you can’t sell quickly. You also don’t want to hold your inventory so tight that you lose out on sales.
Look at your inventory levels closely. During a recession, you might need to lessen your stock on hand. For instance, if your business typically buys 200 stocks for a slow-selling product, you may need to lower the number to100 to stay on the safe side.
Be sure to monitor how your products are selling. Keep an eye on the products that you can do without, too. This way, if a dip in sales occurs, your cash won’t be tied up on non-selling assets.
Don’t forget to strengthen your inventory management strategies as well. Now is the best time to employ the best techniques you have in store.
Protect Your Cash Flow
Businesses also need to look at their expenses closely in times of an economic crisis. Every penny counts now more than ever. Because of this, you need to limit your spending now that you need every bit of savings you can.
This may mean closing other branches, laying off some employees, or cutting down on business costs. If you can, check your business finances daily, weekly, and monthly and assess what aspects of your business is doing well, and focus on that. If something is not profitable, it’s probably time to let it go.
Moreover, as a small-time entrepreneur, you should also check what back-up financing options are available to you. Make sure that if you do obtain additional funding, you’ll be able to manage it properly so you won’t face major cash flow issues during the recession.
If you have money in a bank, check and find out if the bank is stable or in an unstable position. If it is, then it’s probably time for you to consider withdrawing your investments in advance, and moving them to another bank.
Negotiate with Suppliers
Since every business is affected during an economic crisis, chances are, your supplier is struggling to make ends meet, as well. Since both of you are on the same boat, it’s the perfect time to renegotiate the terms and conditions of your partnership.
For instance, you may be able to agree on a 60-day payment period rather than the normal 30 days. If they won’t agree to terms, ask if they can give you a discount if you pay early. The savings you get from that, no matter how little, may go a long way in keeping your business above water during a crucial period.
Get Your Clients to Pay You on Time
Cash flow is extremely important to your business during trying times. With that, you need to be able to collect payments on your invoices as soon as you can. Offering incentives, for one, is a useful strategy that will motivate your clients quicker.
You can also offer discounts for as much as 2% to 3% of the total amount if you receive early payment. This will not only encourage clients to pay their invoices sooner, but it will also help in strengthening your relationship with them.
If your client is late with their payments, you may need to be aggressive, but professional when asking them to pay.
Although they may also be experiencing the effect of a downturn, you don’t have the luxury of extending a payment due date. As a business owner, you need payment to survive a challenging period.
Get Extra Cash for Your Business with Inventory Loans
Going through an economic crisis can be one of the most challenging experiences for entrepreneurs. Many may be forced to close down while some may make it through a difficult period. Preparing for when it happens is the best thing you can do in order to prepare your business for survival.
This is why it’s always important to know what financing options are available for your business. Inventory loans, for one, can help you get access to cash when you need it most. Talk to your trusted financial adviser today, and learn all about business loans for small businesses.