The KBC Bank consumer sentiment index in Ireland plunged to 42.1 in September 2022 from 53.4 in the prior month, driven by concerns about the impact of higher energy cost and rising interest rates.
However, while retail sales have declined in recent months, tax returns have remained exceptionally strong, with unemployment near a 21-year low of 4.3%.
But, with the "R word" out there, the best we all can do is to focus on what we can control.
Below you will find some ideas to prepare your business before the worst come.
1. Invest In Employees
How can a small business maintain its staff, continue hiring talent and reassure all existing and incoming employees they have job security? Amid a recession, small businesses should be able to provide intangible perks, like flexible scheduling and other perks that motivate staff beyond monetary compensation, and financially focused benefits designed to invest in employees.
Some perks could be:
- A free session with your accountant or financial advisor
- Time within working hours for online training courses
- Longer lunch time to allow a walk around the block
- Lunch & Learn events (mortgage advice, health insurance, eye tests, etc.)
2. Focus 10% More Time on Activities Driving Revenue
Now is not the time to shift your business model into something entirely new or higher risk. Also it's not the time to eliminate driving revenue activities.
Use this time to focus on tasks directly driving sales.
Start doubling down on your core competencies: the products and services that have historically driven the most revenue for your business and have strong proof of concept.
3. Track and Manage Cash Flow
If you haven’t already started, track the amount of cash flowing in and out of the business month-over-month. Revise business plans to update financial forecasts, look at whether pricing needs to change and update financial forecasts.
Small businesses in need of more cash may utilize a few strategies. Talk with your key customers and suppliers. Make sure they are paying on time. If possible, business owners may ask if suppliers might accelerate payments if given a better deal. If your small business needs an additional credit or you know due to seasonality you will experience some future pressures, prioritise this need now. Reach out to banks and credit card companies to secure financial support.
Finally, review any discretionary business spending in your company budget. If there are subscriptions you don’t use but still pay for? Reevaluate the purchases your business needs now versus nice-to-haves that may be put off until a later date.
3. Build or Refill an Emergency Fund
Does your company have at least three to six months’ worth of business expenses in an emergency fund? Great! If not, start building this fund.
If yes, but you dipped into the fund and haven’t replenished it, use this time to pay yourself back and rebuild a sufficient cash reserve.
4. Utilise Organic Marketing Strategies
If you anticipate you’ll be scaling back your marketing budget in the event of a recession, now’s the time to review your marketing strategy.
Small businesses can leverage plenty of free marketing strategies, including guesting on popular, relevant podcasts, earning local media coverage and establishing themselves as thought leaders within their industry by guest blogging with relevant media outlets and writing and sharing content that resonates on LinkedIn.
5. Analyse Operational Efficiencies
Explore options such as building a recurring revenue model via subscriptions and diversifying client and supplier relationships.
Small businesses should focus the resources on products and/or services most wanted or needed by customers. This action will bring the most revenue, and the best margins, into the business.
6. Prioritise Valuable Relationships
Which relationships are among the most important to your business? Are these relationships with join venture partners, suppliers or customers?
Identify key client relationships and work to strengthen them.
Send your key clients or customers a personalised note, calling them on the phone or having a quick meeting together. Use this time to tell them how much you value and appreciate their business, learn how the downturn is impacting them and find out how your services can help mitigate some of their current pain points.
Emphasis on strengthening these relationships may lead to continued business throughout a recession and referral opportunities.
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