8.24%. That’s the inflation rate for 2022.
The buzzword among business owners these days is “recession”. Unfortunately, the data doesn’t lie. With prices on the rise and confidence in the economy at an all-time low, a recession may be just around the corner.
The last recession hit in 2008 and sent the global economy into a tailspin. Many businesses went bankrupt, while others struggled to stay afloat. The large companies had the resources to weather the storm, but small and medium businesses were the hardest hit.
If you own a small or medium business, it’s important to prepare for the worst now, before it’s too late. We have compiled 8 ways to get your business ready for a recession.
The logic is simple: if you’re spending less money, you’ll have more to fall back on when the economy takes a nosedive. Across the core businesses, analyze where you can reduce costs without compromising on quality or customer satisfaction.
Economist and author Robert Kiyosaki advise owners of small and medium businesses to “limit your expenses, reduce debt and pay down liabilities.” It’s a simple but effective way to protect your business during times of economic uncertainty.
Three of the most key areas where cost-cutting can be done is advertising, employee salaries, and inventory.
Increase Cash Reserves
Just as it’s important to cut costs, it’s equally important to increase your business’s cash reserves. This ensures that you have the resources to stay afloat if there is a prolonged recession or if any unexpected expenses arise.
It’s a good idea to set aside at least 3-6 months of operating expenses in a savings account so you can access them quickly when needed. You should also consider investing in more liquid assets such as stocks and bonds that can be sold quickly for cash.
Make sure your team is aware of the importance of having adequate cash reserves during challenging economic times. If they understand why this step is so important, they will be more likely to support it.
Be Highly Specific With Credit Terms
It’s not uncommon for businesses to extend credit terms to customers during times of economic difficulty. However, this strategy can backfire if you’re not highly specific with the protocols and procedures.
To protect your business, make sure all customer credit agreements are very clear on payment terms and any penalties for non-payment. You should also collect payments as soon as possible after invoices are sent out. Some of the most successful businesses have payment policies that are strict but fair, and customers appreciate this transparency.
Additionally, consider offering incentives for customers who pay on time or in advance. This will encourage them to stick to their payment schedules and help your cash flow.
Having a Secured Line of Credit
Having a line of credit gives businesses access to quick cash when they need it. This is especially important during recessions, as sales may slow and cash can be tight.
If your business has been financially stable for some time, you should consider applying for a secured business loan or line of credit from a bank or financial institution. You will need to provide collateral such as real estate or other valuable objects to secure the loan.
Having this extra cushion of money can give you peace of mind knowing that you have access to funds when needed. It can also help you meet any unexpected expenses during periods of economic uncertainty.
Stay Focused On Your Customers
The recession won’t last forever and it’s important to keep your customers in mind and stay focused on their needs. This means continuing to provide excellent customer service, creating quality products and services, and continuously innovating.
By maintaining these standards, you can ensure that your customers remain loyal and remain with you even during challenging economic times. You should also be open to feedback from customers about how you can better serve them. This will help build trust between you and keep customers coming back for more.
Renegotiate Your Supplier Contracts
It’s important to keep a close eye on supplier contracts during recessions, as they can quickly become too expensive and put a strain on your cash flow. To reduce costs, consider renegotiating existing contracts and looking for new suppliers with better rates.
You should also look at ways to automate processes like ordering and inventory management that can save you time and money in the long run. Additionally, consider consolidating orders from multiple suppliers into one shipment to cut down on shipping costs.
For service-based businesses, renegotiating contracts with contractors, freelancers, and other vendors can also help reduce costs.
Drill Down on Account Receivables
During recessions, businesses can be hit hard by slower payments and late invoices. To avoid this, it’s important to keep a close watch on your receivables and make sure that customers are paying on time.
If you spot any irregularities or late payments, reach out immediately to discuss payment options. You should also consider sending automated reminders when bills are due to ensure timely payments. And don’t forget to take advantage of technology like online invoicing systems that can streamline the process and reduce manual labor costs.
Hiring a Remote and Lean Team (LATAM)
If your business is able to operate remotely, now may be the time to consider hiring remote workers. This can help you reduce overhead costs and make sure that you have the right personnel in place during a recession.
The average salary in the US is significantly higher than in other countries like Latin America, making it more cost-effective to hire a remote team. Additionally, depending on the language requirements of your business, you may be able to find talent from all over the world that can help you drive success in new and innovative ways. Latin American countries have the same time zone as the US, making it easier to stay on top of communication and collaboration.
Not only will this help you make sure that the right people are in place to drive your business forward during a recession, but it can also open doors to new markets and customer segments.
We at Remote Talent LATAM specialize in connecting small and medium enterprises with the right people from Latin America to help them weather the storm of a recession. Our team of vetted professionals can help you find the perfect fit for your business and reduce labor costs at the same time.
With these 8 tips, you can make sure that your small and medium business is prepared for economic downturns. By staying focused on customers, renegotiating contracts, and drilling down on receivables, you can ensure that your business survives any recession. Additionally, hiring a remote team from Latin America may be the perfect solution to reduce costs during challenging times.
At Remote Talent LATAM, we are here to help you find the right people who will drive success in new markets and customer segments. With our expertise in connecting businesses with teams from Latin America, we can ensure that you have access to the best talent at an affordable price.
Contact us today for more information about how we can help you prepare for tough economic times ahead!