Recession. Even though it is a dreaded word, economists have been predicting one since mid-2018, and now with all the socioeconomic impacts of the COVID-19 virus, a recession is on our doorstep. This one is not the first and probably won’t be the last. The U.S. has lived through the 2002 economic aftereffects of the 9/11 “Attack on America” and the 2007 housing bust which lead to the financial crisis of 2008-2009. In the face of today’s crisis, the best attitude to have is one that is expressed in the title of Gloria Gaynor’s 1978 hit single, “I Will Survive.” More poetically, Walt Whitman penned these words, “Keep your face always toward the sunshine—and shadows will fall behind you.”
What Are the Impacts on Small Businesses?
The COVID-19 crisis is causing a near-term recession due to the cancellation of sports, entertainment and many public events, along with curtailing retail and many other businesses, closures of schools, and “stay at home” orders. All these economic “stalls” will likely have a long “tail” of continuing effects including:
- Decreased customer activity and lowered demand for products and services.
- Lowered cash flow.
- The need to cut budgets.
- Capital may be hard to get.
- Suppliers are also going through hard times, so supply chains may be slowed down or interrupted.
How My Business Will Survive a Recession
Always know that there is “light at the end of the tunnel.” As former U.S. Senator Bob Bennett said, “As sure as the spring will follow the winter, prosperity and economic growth will follow recession.” Use these tips to survive and thrive:
- Revisit your strategic plan. Formally re-shape the plan to ensure it is focused on survival.
- If there are any non-core or side businesses or non-essential investments, exit them.
- Aggressively focus on reducing expenses. Cut unnecessary expenses and eliminate discretionary spending. Delay spending where possible and adopt a “pay as you go” approach where possible. Seek ways to reduce lease or rent payments and seek reductions on utilities.
- Reduce inventory costs.
- Cast an eagle eye on cash flow. Explore ways to speed up collectibles and delay payables.
- Reduce staffing costs while clearly communicating the need so the entire workforce is on-board with the current circumstances. Begin by furloughing people, if possible, rather than eliminating positions. Next, reduce hours and eliminate non-essential positions. Then reduce all salaries across the board. Last, if necessary, make one cut and make it deep rather than “pecking away” at small cuts.
- Seek ways to increase the effectiveness of marketing and advertising efforts. Can you expand your target market or diversify revenue streams? Is there a way to “leapfrog” competition by doing something better or offering a more unique product/service? Don’t give away cash by attempting to discount your way back to success.
- While working to save money, don’t compromise the brand and future business by cutting quality.
- Focus on your current customers and ways to keep them happy, especially your best customers.
Mistakes to Avoid
Avoid these mistakes during a recession in order to prevent business failure:
- Pessimism rules the day.
- Treating business as usual.
- Failing to make the hard decisions about cuts of employees and spending.
- Stopping marketing and advertising.
Get Expert Financial Assistance That You Can Rely On
Contact Doerhoff & Associates, CPA, based in Jefferson City, MO for professional financial, accounting, and financial statement assistance that you can count on. Doerhoff & Associates has one goal in mind, to provide comprehensive business accounting services designed specifically for your success.
