Six Tips for Weathering a Recession as a Business Owner
Some financial analysts have predicted that the U.S. economy may be headed toward a recession. The financial hardship caused by the COVID-19 outbreak has been difficult for many companies. With a potential recession on the horizon, it is time to take steps to recession-proof your company.
If you are unsure where to begin, talk to a Maryland business attorney. An attorney can help you review your business plan and make necessary changes to increase your chance of surviving a recession.
Six Tips for Preparing Your Company for a Recession
1. Review Inventory Procedures
You need inventory for your customers, but you may have too much inventory on hand. You may also have inventory that never moves. Review your inventory to determine if you can make changes to save money. Can you change your shipping procedures to save money? Is there another supplier you can use that will save money? Keep your inventory low. Think about ways you can operate without excess inventory on hand.
2. Cross-Train Employees
Sadly, you may need to lay off employees during a recession. Cross-training employees now ensures that you have someone who knows how to perform multiple jobs within the company. Cross-training can help ensure that your company continues to operate efficiently, even in the face of layoffs.
3. Do Not Reduce Marketing
Reducing marketing can hurt your business during a recession. Consumers may want to make a change to another company for goods and services. Without marketing, you will lose new customers who may need your services or goods even during a recession. Also, you want to keep your name in the minds of your customers so that when the economy improves, they come back to you instead of going to your competitors.
4. Broaden Revenue Base
Look closely at your client or customer base. If one or two customers provide a 10 to 20 percent of your revenue, you may want to diversify. A recession may cause several of your customers to reduce their spending or close altogether. You may need to work on building a more extensive customer base now so you do not face shutting your business down from losing one or two customers.
5. Review Your Debt
Effective debt management is key to success during any economic period. However, during a recession, debt can become overwhelming for a highly-leveraged company. Try to restructure your business so you pay cash for inventory, supplies, and other expenses. While you are reviewing your debt, also make a plan to pay down debt now while you have a steady flow of income. Just don’t pay everything toward your debt. You also need to contribute to an emergency fund so you have excess cash if the economy moves toward a recession.
6. Develop A New Product Or Service
Expand your business by offering new products and services. Think about items and services that people will need even during a recession. Adding that line to your existing line can help your business survive during a recession.
Contact a Maryland Business Attorney For Help
Now is an excellent time to review your contracts and other legal documents to ensure they have terms that would be favorable for you during a recession. Our Maryland business attorney can review all your legal documents and help you make changes that can protect your company from legal issues now and in the future.
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