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June 29, 2022

How to Keep Your Small Business Alive No Matter the Economic Conditions

Categories: Business Tips|

Why some businesses thrive while others implode during economic downswings remains a puzzle to many business-owning entrepreneurs. Oftentimes, they mistakenly assume that all businesses must suffer through recessionary cycles. In reality, some companies are essentially recession-proof, and it is not necessarily because they are bigger, better-known, or more generously capitalized. What really separates the successful enterprises from those that collapse during down cycles is that they are organized around a uniquely dynamic and healthier approach to the business cycle.

They plan for the future, and they keep contingencies in place to confront whatever challenges might arise. They sell products and services that do not go out of fashion as easily. And most of all, they focus on profits in an intelligent manner that helps them grow and prosper any economic environment.

Here are some ideas for creating a company that will successfully weather an economic downturn:

  • Set, measure, and monitor inventory targets, sales goals, and revenues. But make profit – net profit – the main overriding focus.
  • Weed out unprofitable accounts and lackluster ventures, services, and products.
  • Reward top performers, and either improve those who are not contributing or let them go for the benefit of the overall team.
  • Keep in close touch with customers and track their demographic patterns and consumer preferences. The better one knows his or her customers, the better one understands their own business.
  • Develop strategies to attract new customers, retain existing customers, and sell more products or services to each and every customer. Grow the customer base, but also grow net profits in order to capture tangible bottom line benefits.
  • Advertise and market aggressively, but constantly refine and redefine the campaigns to strengthen the business and enhance the equity of the brand name to give it greater power, meaning, and recognition.

Planning Ahead Means Getting Ahead

Once a company starts losing its bearings and gets carried away by stormy economic tides, it is difficult to get safely back to shore. When economic conditions become adverse, those who were barely afloat sink, those treading water drown, and those without a fixed compass get confused and lose their connection to their primary customer demographic. To avoid these effects, it is important to prepare ahead of time for the eventuality of downward market cycles.

According to an article published in BusinessWeek, market measurements and forward-looking financial indicators are important tools. Without them, businessowners may never see hard times coming. Many times, their cash reserves are wiped out without warning. While no business leader has a crystal ball, those who employ simple, easy to read tools for testing and evaluating performance are in a stronger and more informed position. They can sooner identify trends and more quickly adjust and adapt to changes, which gives them a tactical and strategic advantage over their less informed competitors.

Rather than simply shooting in the dark, those who have the proper tools can find targets and hit them. When profits begin to drift downward, they can realign focus to hone in on opportunities in a more precise and accurate manner, allowing them to get back on track to profitability. Those who do not respond proactively to changes are at risk for not only wasting time and money, but also losing their valuable customer base and overall brand integrity.

The Critical Difference between Response and Reaction

The difference between response and reaction generally boils down to deliberate preparation, prior planning, and intentional action. This stands in stark contrast to simply doing something from a place of fear or panic. Emergency response organizations, for example, drill and train for the inevitable. When a fire erupts or a traffic accident happens, firefighters and police officers typically view the situation as another day at the office, because they have planned in advance to react in an intelligent, effective and professional manner. They have the resources on hand, they understand how to best deliver them, and they confront the situation from a position of strength, not in a weakened state of distress.

When a business is planned with proper contingency solutions in mind, it can avoid missteps and bad judgements while capturing a greater market share. Experiencing an economic downturn only makes it stronger – by allowing it to put into action the concepts that it has been practicing all along, it refines and strengthens its approach. Meanwhile, the weeding out of weaker and less capable competitors puts it in an advantageous position once the economy strengthens.