These days, many business owners are finding themselves in the position of trying to find a way to steer their companies through uncertain times. This is the new economic reality. Some have experienced a significant drop in foot traffic, a supply chain interruption, and other issues that have hindered operations and led to a loss of revenue, while others have had to close.
If you’re relatively new to running your own business, it’s possible you’ve never had to deal with anything like this before, but companies usually go through ups and downs no matter what they sell or what industry they’re in. You’ll have times when everything is going great, and business is booming, and then there are times like now.
If you’re reading this article, it means you’re looking for strategies to keep your business afloat. First of all, don’t panic. There are always solutions, and you can look at this as an opportunity to fine-tune your business for greater long-term efficiency and profitability.
Red Flags You Shouldn’t Ignore
When business is slowing down, there are usually some signs that tell you to take action. The loss of revenue is the first and most visible sign. Profits, on the other hand, may not drop immediately. If you see these early signs that business is slowing down, you can take measures to mitigate loss of profit. The easiest way to keep track of these things is by comparing statements with the previous year.
Another sign is a significant drop in sales leads. What numbers are you getting from your sales team? Is there a reduction in referrals or problems in the sales funnel?
If you have a brick-and-mortar business, you can track foot traffic with counters and entry points. You’ll also want to check your website traffic.
Look at the Big Picture
Less experienced business owners tend to want to attack at the first signs that there’s a problem. That’s understandable and can even be helpful in some cases, but it’s always better to first take a step back and look at the big picture. You want to make sure you understand the size and scope of the problem, so you know what’s working and what needs to be changed.
Let’s say that you have a couple of employees that keep making inventory mistakes that result in overstocking or understocking of certain items. While it may seem easier to fire them and move on, a better strategy is to see why these employees didn’t learn to avoid these mistakes during training.
You could retrain them, and this would give you a chance to learn how you could change the way training is conducted, so this problem doesn’t happen again with future employees.
This strategy involves looking at an issue from a top-down perspective. Applied to a business slowdown, you’ll want to examine how your product or service fits into the marketplace currently, how effectively your company model matches the existing environment and consider multiple future scenarios.
Don’t Sacrifice Quality
In difficult times, keeping expenditures under control is critical. Owners must continue on the offensive and enlist the support of their staff in order to implement improvements. However, take care not to sacrifice quality in the process.
Let’s say you own a pizzeria and you’re going through a slowdown. You could feel tempted to expand margins by getting cheaper ingredients. This strategy can backfire because customers might not like how these changes affect the taste of your pizza and prefer to go elsewhere, causing your sales to drop.
It’s good to reduce costs during times like these, but you should never compromise the quality of what you sell.
Talk to Your Bank and Suppliers
If you’re having trouble paying your bills, contact your suppliers to see if they are willing to provide you with more flexibility like an extension or payment plant. You’ll also want to contact your bank. If you have lines of credit, this is a good time to use them but make sure you have a plan in place for repaying them.
If you’re above the age of 55, you could also ask them how to apply for a reverse mortgage which would allow you to access the equity you’ve built up in your home. Proceeds from a reverse mortgage can be used for anything, including building or expanding a business venture.
For a small business, building a positive relationship with your bank is always good since you want to have as many potential sources of capital as possible whenever you need them. When business is slow, your goal is to maximize the cash on your balance sheet.
Talk to Your Employees
You should also talk to your employees about what’s going on. This initiates a conversation where they can ask questions or express their concerns directly, allowing you to respond quickly.
It also makes your staff feel trusted, encouraging them to become a part of the solution rather than a source of additional stress. They can handle bad news, but if they feel like their employer is not honest with them, it can hurt the relationship. By removing the mystery and fostering open communication, you can create a space for optimism and forward thinking.
Payroll is generally one of a small business owner’s highest expenses, and they know that. They’ll also know that you want to make sure that they’re on board and doing their job effectively.
Scale Back
One of the best things you can do when business is slow is to cut back on inventory purchases, so you don’t lose any more money on excess inventory. You also don’t want to panic and spend too much on marketing. Always make sure you do your research, so you get a good return on investment.
You may also want to consider cutting back on employee hours. This is probably the last thing you want to do, but if you’re honest to them like we suggested in the previous tip, they’ll want to help the business they work for make it through an economic downturn.
Now is the time to tighten up your finances as much as possible. This can be accomplished by doing a thorough examination of your cash flow and inventories to determine where your money is being spent. Think about what you need, what you can go without, and any cost-cutting measures you can implement. By saving money now, you’ll be able to ramp up and fulfill orders once things start picking up again.
