Is your business recession-proof?
On a recent Blab podcast I showed how to recession-proof your small business.
The truth of the matter, though, is that you can’t really continue on in business through a recession without feeling it in some way.
“Recession-proofing” in my book means not only riding out an economic downturn, but actually prospering. Yes, it’s possible!
In fact, who would want to merely survive a recession when you can grow and acquire new and significant assets much more easily during a recession than during robust economic years? We discussed that last week, and I hope you gave it some thought so that you can be poised to take every advantage of a recession if one occurs.
But how will you know if one’s coming? Can your business survive a country-wide recession, or even a “micro” small business recession, say one resulting from your own sluggish sales, lack of marketing, or overspending?
The other side of the discussion about riding out a recession is simply and literally KNOWING how the economy (whether on a national scale or a personal level) may be affecting your business before you actually FEEL it.
The ability to strengthen your business during a recession is purely due to preparation and planning.
This is only possible if you are in the habit of reporting your numbers and honestly mapping out where you’re headed. Now I know it’s the rare small business owner that loves doing a cash flow chart, but let me paint a picture for you…
Operating a small business without a cash flow chart is like driving down a highway blind and without a map. You’d never do it if your life depended on it, so why are you avoiding this one simple task that’s at the core of your small biz success?
Start By Knowing These Seven Figures
Here are the seven figures you need to be tracking and reporting, and why:
2. Sales conversion
3. Average sale
4. Number of times purchased
These first four numbers give you your revenue. Then, calculate your:
6. Lifetime value of customer
7. Cost of acquisition
How often should you do this? Just like a money date, it needs to be a regular occurrence. I suggest monthly reports so you can identify trends downward and correct your course. At the very least, maintain quarterly reports. If you ignore this, and put off making these calculations until your annual tax time, or after a recession hits and you’re trying to determine whether you can even keep the doors open, it’s probably too late. Not only are you leaving serious money on the table, but you may even suffer losses so large you cannot stay in business anyway.
Of course, if you wait to do this task yearly, you will have already FELT the decline you could have avoided if you had tracked these numbers. This is what you want to avoid.
Continue By Tracking Your Cash Flow
When you track your cash and your important business stats, you experience a couple of notable benefits. Not only do you see a downward trend before you feel it, but a subconscious mental flip of the switch occurs. You sstart denying yourself little luxuries you may have otherwise splurged on. Or you may be more excited to put extra money in the bank, or to seek out just 10% more gain or profitability from your day-to-day activities.
Knowing where you are today really is the key to determining where you’ll be in the future. And if a recession strikes you won’t be left scrambling like your other poorly prepared peers.
[FYI: Now, I make no commission from this recommendation, but I use and like the cash-tracking software Pocketsmith. There’s a free version to get you started and some reasonably-priced monthly services that integrate with your bank accounts. If you want an easy and fun (really) way to track expenses, income and cash, try it.]
I’m not asking you to become a numbers gal like me!
But as your small biz coach, I am asking you to take this recession-proofing guidelines into account before you become a small business statistic.
I have no crystal ball and I certainly can’t foresee the future. I’ve made plenty of mistakes as a small business owner, suffering my own economic downfall during the last recession as a result of poor planning and choices I made that threw off my goals for my business. It wasn’t until I discovered that I didn’t have accurate goals based on reality, that I realized I could do something about the destiny of my business.
Let’s make the coming days happy and prosperous, no matter what the next few years hold. Recession? Bring it on!