Protect The Life of Your Business From Recession
Thanks to the alarming risk of an economic recession, it is imperative that you safeguard your small business.
At the beginning of the year, the economy grew at the slowest rate since 2009, at only 0.4%. AMP Capital chief economist, Shane Oliver, told the ABC that risk of an Australian recession by 2020 has risen to 25%. Small businesses will be the ones hit the hardest.
Inadequate preparedness can make it almost impossible for a small business to survive. However, the right strategies will help prepare your ship to withstand the storm. The Australian Securities & Investments Commission implores you to employ strategies to protect your business. With the right approach, small businesses can show remarkable flexibility and thrive despite the reduced cash flow. Even if there is no recession, these tips are useful for the safety of your business in an unpredictable market.
- Reduce your debt.
Ask yourself, do you have any loans that can be altered to get better rates or renegotiated? Can your budget be reworked? Revisit your financial plan, preferably with the guidance of professional help, and adjust for unexpected changes in cash flow.
- At the same time, reduce any debt owed to you.
Is there money owed to your business? Start collecting debts and reduce your terms. Remember, money coming in quicker than it is going out is key for healthy cash flow.
- Reduce the cost of running your business.
Slashing little costs can have a significant impact. Look at your overheads to see if you can negotiate and get a better deal. For example, simple things like phone plans, insurances, cost of goods sold or subscriptions no longer in use.
- However, do NOT cut costs on marketing.
The biggest mistake business owners make is cutting their marketing budget. The reality is, when there are challenges to your business, a stream of communication about you to the outside world will be your saviour.
- Savings, savings, savings.
If a recession hits, you will want a savings account. Do not underestimate the power of a rainy-day fund. Put aside a percentage of your income each week. Even without a recession, this will help if there is a dip in cash flow or when things get tight. According
to the Financial Review, falling house prices have affected the capacity for small businesses to borrow from banks. The growth of loans that are less than $2 million slowed to just 0.8%; the worst it has been since 2011. If the recession hits, and you cannot get a bank loan, a savings account will be your saving grace.
- Move that old stock with a sale.
Old stock can turn into a liquid asset. If you have old stock sitting around, it is worth something. MOVE IT. Sell it with a great sale and then deposit the extra coin into your savings account.
Without being too pessimistic, the economy is on most accounts looking gloomy. If there are recession conditions, your business could be in peril. These tips are essential to protecting cash flow and ensuring your business can withstand the blow. For more professional help, contact GTS by calling 0425 851035.
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