How to Make Your Business Recession Proof

(Last Updated On: August 15, 2017)

Do you have a business that produces some essential products that people will buy no matter whether the economy is booming or it is going through a downward cycle? If your business deals with products and services that do not belong to a “must have” category, you should follow the steps below to make your business recession proof as there are chances that the economy’s downturn would severely affect the buying patterns and volumes of your products and thus it will affect the viability of your business.

Easy steps to a recession proof business

Yes, there are some ways available for you to ensure the effect of such downturn is minimized. Here are just a few easy steps to take to make your business recession proof:

Get good grip of cash management

You need to monitor your company’s cash flow carefully using different tools so you do not get caught up with surprises. Cash is king and this requires a smart working capital management. Ensure that your collections of receivables don’t pileup and consider discounts for instant payment or even invoice factoring.

Reassess your credit situation

In a recessionary phase, banks and lenders are less likely to extend increased loan to businesses and when they do so, there is an increased interest rate that becomes applicable. So, if borrowing becomes tough, you need to look for other ways to ease the financial situations. How about discussing with your suppliers for an extended credits ?

You can also consider selling the non-core assets that you don’t need any more if you are facing a cash crunch.

If you have plans to raise equity using external investors, do it soon since raising equity gets more expensive and tough when economy goes downwards.

Sell wisely

Assessing the effects of recession on your products and revenues gives you a feel regarding the level of vulnerability. This vulnerability could be in reference to specific product demands  or the vulnerability of a specific customer’s behavior. Assess the creditworthiness of your customers before working on a large order.

Another area you need to consider is sales productivity. If you manage your sales team’s time more effectively and aggressively, you might be able to use this tool rationally.

Market efficiently

Tracking your customer acquisition cost leads to a more resource-efficient conversion. You can reassess your marketing budget and look for cheap marketing tools, such as email marketing, public relation, online marketing, etc.

Cutting costs

Analyzing your business’s breakeven point gives you an idea on how it can be brought further down. Broadly, there are two ways of doing this; i.e., reducing your fixed costs and increasing your contributions per unit (sale price minus per unit variable costs). Outsourcing certain tasks is definitely one strategy that could bring down the costs. Also, look for new suppliers or alternative raw materials or processes that may help in reducing expenses, thus taking it a step forward to a recession proof business.

If you are a businessman, you definitely know that you can’t avoid a recession cycle driven by the factors that you cannot control. But there are a lot of things that you can control pro-actively to minimize its adverse impact and easily turn into a recession proof business.
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