With the current economic climate still proving a challenge for businesses and speculation around whether we are heading towards a recession, it is worth focusing on how you can strengthen your business to withstand any further economic downturns. 
 
Some of the issues businesses are currently facing which are usually hallmarks of a recession are: 
 
• Decline in customer spending as they seek to tighten their belts 
• Reduced business investment due to a lack of confidence 
• Tightened credit that can lead to cash flow problems 
• Increased competition and pricing pressure 
• Supply chain disruptions impacting the cost and availability of materials. 
 
At our July business networking event, Victoria Moulds presented to fellow business owners on the key risks that all businesses are facing at the moment and went through some positive action points that they could take to build in some resilience and emerge stronger. 
 
What are the crucial things to get right? 
 
One of the most critical things to your business's success is financial resilience which means having a focus on these areas: 
 
Cash flow management –managing your cash flow effectively using a 13-week rolling cash flow forecast will mean that your business has visibility over potential shortfalls in the near future. Once you have this visibility you can take action to resolve it. For example, if your cash flow forecast shows you can’t afford to pay the quarterly VAT then you can move some planned expenditure around or speak to HMRC about a payment plan in order to resolve that shortfall. 
 
Cost reduction – identify areas where you can reduce your costs without compromising on your quality. This can include negotiating better terms with suppliers, optimising your inventory levels and eliminating unnecessary expenditure on nice to have items that don’t add specific value in your business. 
 
Debt management – if you have debt in your business then prioritising debt payments, negotiating extended payment terms if needed, and considering refinancing options can be used to reduce financial pressure. 
 
For more tips on building financial resilience read our dedicated blog
 
Profit margins – One thing to consider is whether your business is making sufficient profit in its current form. If profitability is a problem, then cash flow issues usually follow. One way to protect profitability is to review pricing and make sure that you have priced your services correctly. For example, if your costs of sales have increased by 10% you need to raise your prices by 10% to ensure that your profit margin doesn’t suffer. 
Customer base - Have a look at your customer base and see whether you are reliant on a particular customer or sector. If you are, you should try to diversify your customer base to reduce the risk to your business if a client or sector faces particular economic difficulties. This may require you to adapt your services or product lines but will help to de-risk your business. 
 
Marketing - Don’t be tempted to cut back on your marketing and sales efforts but examine more closely what is working and what isn’t. Focus your spending on activities that are yielding results and have a clear plan of who you are targeting and how to reach them. Marketing is an investment, and it is important to ensure that customers and prospective customers know about your business and your products/services, so they choose to buy from you rather than your competitors. 
 
Retention - Consider the service you provide to your existing customers and try to go above and beyond in order to retain them – it’s easier to keep an existing customer than win a new one. Stay in the forefront of their mind with regular contact with updates or newsletters and build a closer relationship with them. You could also create loyalty programmes with incentives for introducing new customers such as referral vouchers or money off their next order. 
 
Whatever you do it is important to ensure that you keep focused on your cash flow and manage your expenditure without strangling the business. If things aren’t going well, tackle issues head-on before they grow bigger and don’t be afraid to seek out support if you need it. We are always available to help you build a stronger business and work with you through the good times and bad, contact us
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