As a business owner and coach, I understand the fears and challenges of the current economic scenarios that we are all dealing with from both a personal viewpoint and as a third-party observer. Dealing with high inflation and possibly a recession to follow is something many current business owners have never had to face. Here are seven strategies you can use to manage your business effectively during turbulent times like this.
1. Watch your Margins closely.
When inflation goes up, it is easy to start losing profitability if you don’t keep up. My suggestions are to raise prices where you can and manage/reduce costs where it makes sense. When cutting costs, be sure to focus on costs that don’t contribute to your profit, which means you should avoid arbitrarily cutting expenses like marketing and other expenses that are actually investments. If your marketing is working, keep it going; if it is not, figure out why and make the changes.
2. Have a clear USP.
Make sure that you have a clear and obvious Unique Selling Proposition (USP). Your USP is what differentiates you from your competitors, and helps you maintain your pricing power. It may need to be updated or modified to reflect current market trends, and you need your marketing to reflect it.
3. Check your Financial Mangement Systems.
Be sure that your Financial Management systems are working and that you are monitoring to a budget and cashflow plan.
4. Manage your cash closely.
This is critical during both inflationary times and during a downturn. Keep a close eye on your cash gap during this time, and you need to be as liquid as possible in your assets. Accelerate receivables, expend your payables as much as possible and avoid unnecessary capital expenses.
5. Focus on wallet share not market share.
Wallet share is your share of your clients discretionary spending, vs. market share which is just your share of what people spend in your category. Help your clients decide to spend their money on your products and services by offering value-added services to help them choose to keep coming back to you.
6. Focus on Retention over Acquisition.
Focus more on customer retention than on new customer acquisition. Provide exceptional levels of service, offer personalized services, pay close attention to what they need now and help them find it in your offerings.
7. Improve efficiency.
Improve the efficiency of your operations, by eliminating waste, unnecessary and non-value-added steps from your processes. You can reduce costs, improve margins and possibly even find ways to pass some of the savings along to your clients.
If you would like some help identifying and implementing the right strategies for your business, let’s schedule a 30 minute call to discuss how we can come up with your Recession Proofing plan.
Author: Mark McNulty, Business Coach in Louisville, KY