Starting and running your own business is no walk in the park, but it can be a fulfilling adventure. Unfortunately, even the most prosperous companies can feel the pinch during a recession.
When a recession strikes, it can be rough: consumer spending decreases, competition increases, and operational costs go up, making it challenging to keep your business afloat. But don’t despair, having a solid plan in place can be a game-changer – and that’s where Mike Michalowicz’s Recession Response Plan comes in handy.
This Recession Response Plan is specifically designed to help businesses navigate through the uncertainties of a recession. By following the steps outlined in the plan, you can gain better control over your finances, make informed decisions, and take proactive measures to safeguard your business.
So, let’s roll up our sleeves and dive into the plan together!
By the way, this post is part of the “Rallying During the Recession” series, a series where we share valuable advice on how to recession-proof your business. For more helpful tips, hop over to our Learning Center.
Let’s talk cash flow! According to Michalowicz, one way to keep the money rolling in is by offering new payment options and looking out for clients who may be at risk of not paying up.
To keep your outflow in check, it’s time to start cutting expenses that don’t bring much value to the table. It’s also a great idea to renegotiate deals with suppliers and trim any personal expenses that may be weighing you down. Remember, every penny counts when it comes to keeping your business afloat during tough times!
To keep your business stable during a recession, Michalowicz recommends regular financial check-ins, focusing on high-margin products, and keeping the lines of communication open with your clients.
But we’re not just aiming for stability; we’re also looking for opportunities to grow. So, it’s time to get bold and start looking for recession-resistant markets and opportunities. And don’t be afraid to make some big moves, like acquiring competitors, to position your business for success in the long run. It’s all about thinking strategically and taking calculated risks!
Managing debt can be a real headache, but there are a few things you should keep in mind to make things easier. One of the things that Michalowicz recommends is being cautious with debt leveraging and bridging.
Debt leveraging is when you borrow money to increase your potential return on investment. It can be a smart move in some cases, but it’s essential to be careful when taking on more debt, especially during a recession.
Bridging, on the other hand, involves taking out short-term loans to cover cash flow gaps between payables and receivables. While it can be helpful, it’s important to be mindful of the interest rates and fees associated with short-term loans.
Of course, we always recommend that you avoid taking on new debt during a recession if at all possible. However, if you find yourself in a position where you need to borrow money to keep your business afloat, having a high credit rating can be a lifesaver. Lenders will be more likely to approve your loan application and offer you better interest rates if they see that you have a solid track record of managing debt and maintaining a high credit score.
So, while it’s crucial to be cautious with debt during a recession, it’s also important to focus on building and maintaining a strong credit rating for the long-term health of your business.
Now let’s talk about how to keep your finances in check during a recession. Here are three things you can to do to stay ahead of the curve:
- Set up new general ledger (GL) accounts for unique situations.
- Review your inventory and invoicing processes.
- Evaluate your client history.
By taking these steps, you can keep your finances in order and ensure that you’re not missing any crucial details. It’s always a good idea to stay on top of your accounting to avoid any unpleasant surprises in the future. Trust us – putting in the effort now to review your finances can save you a lot of trouble down the road.
Make sure to keep up with your tax estimates – treat them as due on April 15, June 15, Sept 15, and January 15 (even if you end up getting an extension).
And here’s a pro tip: maintaining a separate bank account for your tax expenses can make things a whole lot easier come tax season. No one likes to scramble for funds at the last minute, so a separate account can help ensure that you’re ready to go when the time comes.
Here’s the bottom line: a solid strategy can help you pivot, adjust your operations, and come out of the crisis stronger than ever. That’s why Mike Michalowicz’s The Recession Response is such a valuable resource for recession-proofing your business.
Don’t be caught off guard – take control of your situation and move forward with confidence.
Running a business is hard enough without throwing a recession into the mix. But don’t worry, you don’t have to handle it all by yourself. Sum of All Numberss is here to support entrepreneurs like you with our professional consulting services and financial training programs. Give us a call at +(888) 564-5777 or reach out to us to see how our expertise could benefit your business.