Not long ago, a well-known professional wrestler had a popular catchphrase he would shout out during TV promos. “That’s the bottom line, ‘cause Stone Cold Steve Austin said so!” This meant the audience could bank on what the hulking grappler had said would come true, usually to someone else’s grief. Stealing a phrase from Mr. Austin, what’s the “bottom line” on the current economy? And is there something coming that could cause small business owners grief?
Right now, as of mid-August 2019, the line looks encouraging. Unemployment stands at a low 3.7 percent. The latest small business confidence index has fallen slightly to 103.3, but still remains historically high. The annual inflation rate for the 12 months ending in June 2019 tallied a modest 1.6 percent. Even stocks continue to rise, with the current bull market now past its 10th anniversary, making it the longest on record. One small negative blip recently appeared when the Purchasing Managers Index fell to 51.2 in July, its lowest level in three years.
If there’s one thing certain about good times, it’s that they don’t last forever. Somewhere, sometime in the future a downturn in business or some other crisis will occur. As Austin would put it, “that’s the bottom line.” History has shown it time and again. Austin made a career out of sneaking up on unsuspecting opponents and applying his dreaded “Stone Cold Stunner” with devastating results. But unlike a clueless brawler, you don’t have to be caught by surprise. Here are a few heavyweight suggestions that may ensure that even when times do get tough, you’re still standing when the match bell rings.
Don’t Cut Advertising, Publicity and Marketing – It’s always cheaper to try to wrestle new sales from existing customers than to find new ones. As a result, many small business owners believe the first department to cut in a downturn is marketing. That belief can prove fatal. True, building upon and expanding existing client relationships is never bad policy, but not going after new customers is. Without new customers continually refreshing and growing the sales pipeline, an operation quickly stagnates and ultimately shrinks or even dies. A downturn is a great time to renew marketing, advertising and publicity. For one thing, your competition may be foolishly cutting back, leaving an opportunity for you to build market share at their expense. For another, customers may be using the downturn to search for new vendors and better deals. If you’ve cut back on or eliminated marketing, you may not find them nor they you.
Recession-Proof Your Personal Credit – Just as a homeowner prepares for winter by weatherproofing a house in the fall, wise small business owners use prosperous times to ensure their personal credit can withstand tough economic times. Small business loans are hard enough to get as is, with nearly 50 percent getting denied. Those loans are even tougher to secure in a recession, as banks keep money close and become risk averse. This means you may have to use your personal credit to keep your business afloat. Do what you can now to boost your credit rating and available credit lines.
Manage Inventory, Vendors and Debt – When you’re in a hole, the first step in getting out is to stop digging. In a downturn, excessive inventory, costly vendor contracts and excessive debt can tag team your business, making a bad situation even worse. As a recession begins, take steps to reduce inventory, renegotiate vendor contracts or seek out new ones, and pare down debt. These actions will turn your organization in to a lean, mean fighting machine able to better withstand a downturn.
Focus on What You Do Best – When times are good, businesses naturally expand into new areas and diversify their offerings outside their primary area of expertise. This is a good and healthy thing. But when times get bad, these extras may drag you down. Every business has a core competency that forms the basis of their business and sets them apart in the marketplace. Focus on this strength during a downturn. If you’re a widget maker that does event planning on the side, event planning probably distracts you and wastes resources better spent on the real center of your business and earnings.
Protect and Improve Cash Flow, the Lifeblood of Your Company – It’s no revelation that in tough economic times, access to money tightens. The best way to keep your business off the mat in a recession is to keep a healthy stream of cash coming in. This means, as mentioned in the first tip, to resist the urge to drop marketing efforts that identify new customers. It also means ensuring those who have done business with you pay you for your products and services in a timely manner. In an economic downturn, businesses will naturally try to delay paying expenses and invoices if possible to keep funds on hand. A 30-day invoice can quickly turn into a request for 60 or 90 days, greatly impacting your cash flow and harming your small business’ ability to function.
In a recession, one proven method to improve cash flow and protect your business is to engage the services of a factoring company. The factoring company can fund you the amount of your outstanding accounts receivable invoices upfront, giving you the cash you need today to run your business today, and eliminating the worry and hassle of slow pay collections. You’re left free to run your business.
Invoice factoring is a convenient alternative to a traditional bank loan or fee-laden online loans. Factoring gives you the money you need when you need it with no long-term obligations. You can also get cash quicker through invoice factoring – usually within a day or two. To learn more, simply call toll-free 1-855-219-6008 or email firstname.lastname@example.org.