Protecting your small business is a crucial role you play as a small business owner, and there’s never been a time where your business is more likely to face crises than 2020.
One of the most significant risks currently facing businesses is that Australia has officially entered its first recession since the early ‘90s. While leading economists believe the September quarter will show economic growth, most experts fear that the fall out on companies both big and small may still be felt for years to come.
During this time, your business may face reduced cash flow, potential employee layoffs, loss in demand for your product/service, and/or marketing constraints. Whichever is the case, you’ll want to know what protections you could put in place for your finances, and your employees.
Here are some ways you can protect your business’ finances in times of crisis:
1. Preserve your cash flow
One of the best ways to protect your finances during times of crisis is to preserve and boost your cash flow. This may mean pausing new employee hires to preserve your existing profits, for example, and focusing on cash flow stimulation.
However, if your company isn’t getting as many new clients or sales at the moment, this can feel challenging. There are a few ways you can stimulate cash flow in a downturn. These include: implementing new pricing models with existing clients, launching new projects or innovations sooner rather than later, or decreasing marketing costs wherever possible.
If you’re considering taking out a loan and your cash flow is suffering due to unpaid invoices, you could seek the help of an Australian invoice financing company.
Invoice finance, also known as debtor finance, allows business owners to bypass the stress of taking on new long-term debt, and your cash flow will immediately see improvements.
Invoice financing allows business owners to unlock the capital tied up in their unpaid invoices, and turn it into working capital. And because loans are secured against your accounts receivables, there’s no need for real estate security, unlike other forms of business loan.
2. Take a bigger piece of the pie
In a time when Australians will be spending less, another way you can protect your finances is to step back from vying for new customers, and pivot towards taking existing customers from your competition.
Start by thoroughly researching your competition and outlining their strengths and weaknesses compared to your business. For additional data, you can even survey your customers to see what they like, or don’t like about your company.
Then, identify any opportunities you can see to bring competitor customers over to you. Perhaps there is a service or product your competitors are offering that you could not only add, but do better? Maybe one of your competitors draws a lot of customers from social media, and this prompts you to expand your social reach? Adapt your business accordingly so you can take a bigger piece of the pie.
3. Don’t try to reinvent the wheel
One major way that businesses can suffer in the panic of a crisis is to try and diversify into areas that don’t suit their business or their customer base. This is different to trying to take customers from your competition, as it’s about identifying your strategic assets and maintaining brand integrity.
For example, in the 1980s, word-leading cement producer, Blue Circle Industries, decided to diversify into home building products, including real estate and home décor. Unfortunately, very few ideas were successful. This is because the company did not have a clear understanding of their strategic assets or how to best make use of them.
Sometimes simplicity is key, particularly in economic downturns. You may damage your core business by funnelling resources to new areas that not only don’t suit your business but may hurt your reputation.
Take stock of your business’ unique and indisputable competitive strengths – otherwise known as your strategic assets – and focus on how you can grow in these areas, as opposed to trying to reinvent the wheel.