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I’ve gotten a lot of questions lately about a potential recession, and I talked about a little bit here but I thought I’d dive in a little bit deeper.
Hi, this is Judi Otton with GrowthCast if you have questions please reach out, or send something via social and maybe I’ll answer them in a video. So let’s get to our topic today.
Here are some strategies that you can use to recession-proof your business. These are good strategies any time, but even more important now.
First of all, make sure that you’re paying down your debt, especially any high-interest rate or variable-interest-rate debt.
Make sure you have access to capital. If you don’t have a line of credit, it’s always better to set that up before you need it. You don’t have to take money out of it until you need it, but again – easier, better, and more likely to be successful if you ask for that before you really need it.
Next focus on the parts of your business that handle needs as opposed to wants, because if people are worried about a recession, they may dial back their discretionary spending.
Next, cash, we’ve all heard cash is king. I specifically for today want to focus on your accounts receivable. First of all, make sure that you’re invoicing very promptly. You’re not going to get paid until you invoice, so make sure that gets done very quickly. You may want to offer a discount for early payments. If your normal terms are net 30 maybe you want to offer a few percent off for a net 10 or net 15 payment. And finally, with respect to A/R, follow up as soon as things get late.
You may want to keep an eye on your inventory. Tighten up your inventory. You don’t want your cash tied up in inventory. So sell what you’ve got and be judicious when reordering.
Keep investing in sales and marketing. You’ve probably heard my story about the recession of 2008. I owned another business, we cut back on lots and lots of things and invested even more heavily in marketing and sales training for myself and my partner at that point
And finally, pay attention to your numbers, and understand your expected income and expenses for the next 12 months. Have a budget. You’ve heard me say that a lot, make sure you have a 13-week cash flow forecast and make sure you understand your margins.
Now, this is a lot. These are all things that you can do to make yourself more likely to thrive through the recession.
The last thing that I want to offer to you is to focus on the things that you can control. You cannot control what happens in the worldwide economy but you can control the health of your business. So if you would like help with any of these things, feel free to reach out and I’m happy to have a conversation.
This is Judi Otton with GrowthCast and I’ll be back next week with a new Fiscal Fitness Tip of the Week.