While many still fear to admit, analysts report that much of the world has entered into what we call “a double dip recession” that has snowballed since the third quarter of 2011. While Europe and the United States are seen as most vulnerable regions in this downhill economy, other countries like Canada, Singapore, and China have seemed to wiggle their way to recovery somewhat faster than their neighbors.
In such a volatile market and insecure trading ground around the world, small businesses seem to be on either side of the fence – those that fold overnight and those that gain sustainable advantage and beat the competition. As a small business owner, protecting your assets and holding the front while the storm passes through is critical to ensuring that you will be one of those left after the gray skies have cleared.
Since small businesses do not have abundant cash flow to support operations in a recession, a key transition, to preventing getting in debt and defaulting on loans, is to cut losses early in the race. Without sufficient orders or sales receipts to cover operating overhead and staff wages, necessary measures have to be taken to ensure that money is well-spent and any extras are reduced. While many businesses begin cutting back on marketing and advertising budgets first, a core business element that will continue to attract new customers should not be reduced significantly. Instead, start cutting from unneeded storage space, operating tools or units, and excess inventory supplies.
Make full use of liquidating inventory and assets that do not need to be sitting in storage. Offering sales discounts and promotions is a great way to move inventory faster than you normally would. Closing in on quick sales, even if it’s at a smaller margin than planned, is vital at keeping the business alive. Be careful not to seem like you are “dumping” stock in a flurry because of fear of a recession. Time all discounts and offers to be able to sustain your business throughout a downtime.
It is true that no one can really predict and plan to manage a small business perfectly in a recession, but taking the necessary measures to preserve a sustainable business model and weather out this economic downturn is the key to surviving another recession.
Of course, the last vital strategy to helping your business is to refrain from investing liquid cash that can be kept aside as emergency funds for your business. It is wise to stay away from the fluctuating investment market in these difficult times anyway, and cash in-hand is always better for a small business owner at this point.
Take the test! Do you know what countries were the least affected by the recession in 2010?