Today's Tip: Have a Plan
Let’s take a page from the books of the big dogs, a.k.a. large corporations. Large organizations have crisis management plans for a variety of natural disasters and other events that can severely impact business operations, and so should you. Ironically, no one had a plan for a worldwide pandemic, but they do now!
Here are some tips for how you can prep your business for an economic downturn:
- Optimize your pricing – Yesterday’s price might not be tomorrow’s price. You need to ask yourself some key questions. Is your business making a sustainable profit on each order? Does the current pricing structure serve the business and the customer by offering them value and you profit?
- Build up your cash reserves – Take a break from reinvesting into your business and instead store away some cash. Whether that’s through a traditional savings account or other savings instruments, make sure that you’ve got a decent amount of cash on hand.
- Manage your cash flow – In my article “The Importance of Automating Invoicing and Accounts Receivable,” I talked about the significance of strategically setting your payment terms. Getting paid in a timely manner for work performed is key. For example, if issuing credit to customers affects your ability to pay the bills when they are due, then issuing credit might not be a good fit for your business.
- Get a handle on your costs – In order to successfully build cash reserves, you have to make a profit. Profit equals total revenue minus total expenses. If your customers have less discretionary income, then you’ve got less revenue. Take a look at your overhead costs. What can you cut?
- Make data-driven decisions – During the COVID-19 pandemic, so many businesses made changes to their services in an effort to make money. Look at how many of us were printing custom face masks! While it is ok to follow demand, make sure that you make sound decisions based on quality data. Understand the impact of the pivot before diving headfirst. Just because something works for a decorator in Boise, Idaho, does not mean that it will work for a decorator in Miami, Florida. There are simply so many factors including demographics, climate, and competition to name a few that can affect the outcome.
