How to prepare your business for a recession
There is, apparently, no escape from the constant barrage of recession doom. The Bank of England has warned that the U.K. is heading for its longest recession since records began. We could potentially be staggering into a recession lasting well into 2024.
We know… it’s a LOT.
Yes – 2022 has truly given us some strong shit-show vibes (let’s not forget the fact a recent Prime Minister was outlasted by a lettuce). Yes – it’s been a real roller coaster for business owners.
But it needn’t all be gearing up to a bleak 2023.
Business Consultant and Mentor Chelsea Cox joined a recent Found & Flourish guest expert session – to provide invaluable insight into how to prepare your business for a recession.
There was an abundance of helpful information from both Chelsea and the community, so we thought it was well worth a follow-up article.
Sure – a recession might be around the corner, but with some expert advice and the ongoing support of the F&F community, we hope we can make the burden a slightly lesser one.
Here we round up Chelsea’s top five tips for preparing your business for a recession – covering everything from planning to diversification, finances and more.
Let’s get into it.
1. Get to grips with your finances
This is Chelsea’s most important tip and is something she sees a lot of small/medium-sized business owners struggle with.
Do you have a total handle on your cash flow and finances?
As a business owner, it’s essential you know your numbers. You’ve got to be crystal clear on what your outgoings are – and what you need to bring in each month as a result.
And the only way you're going to do that is by looking at the figures – regularly (we’re talking daily, or at least weekly here).
If you’re not familiar with your finances, now is an opportune time to address this, as we head towards a new year (can we say that yet?!).
Grab a cuppa, sit yourself down and ask yourself what is it you need for your business to function in terms of outgoings. Then, from a cash flow point of view, what’s coming in in the next week, month and year? How much tax do you need to put aside? Are you making sure you’re keeping that extra percentage aside for savings (or indeed for times of sickness, or holiday)?
Chelsea has provided a super-handy financial tracker to support you with this here
2. Ensure your prices reflect the rise in inflation
Second hot tip coming through! It’s a biggie…
Chelsea’s next ‘must-do’ as we head into murky economic times, is to ensure you’re increasing your rates in line with inflation. So at the moment, that is likely to be around the 10% mark.
Feeling clammy at the mere thought of it?
We’re all aware of the challenges that entrepreneurs and particularly female entrepreneurs can face in terms of money conversations. It can feel awkward, embarrassing or downright vomit-inducing. You might also be feeling that everyone is struggling at the moment, and you can’t possibly pile on more stress by raising your rates!
But other people and other businesses aren’t your responsibility. Ultimately, if you don’t raise your prices – you’re losing money. You could be bringing in the same amount of money as you were in the last year. But if the rate of inflation and your cost of living has risen by 10%, you're losing 10% of your revenue. Hella no to that.
“Trust me when I say – the big corporations you’re paying each month aren’t sitting around worrying about whether or not they should increase rates by 10% – neither should you.” Chelsea
If the thought of these types of conversations does make you want to curl up and die, then coming into a new year is a great time to make clients aware of price increases. Give people some notice if you feel more comfortable, so any rise is less of a surprise.
You can be transparent too – let them know it’s due to economic circumstances. Sparking a conversation with clients around this subject might in fact encourage them to look at their own pricing and bring these types of conversation out into the open a little more.
A price review is something you should bring in every year. Sure, you might not always be increasing prices by 10%, but it’s an important benchmark to assess regularly – taking into account not only economic factors but your growing experience, demand, added value for your clients etc. too.
3. Diversify your revenue streams
We’re hearing a lot about people’s diminishing spending pots as a result of economic difficulty. You might be fearful that your product or service is first for the chopping block, as people start to scale back.
If so, it might be time to think about diversifying your revenue streams.
The idea here is to attract new customers. These are people that might be reducing outgoings due to year-on-year rising costs, or those who simply don’t have the funds for your signature or premium offering. With people tightening their belts from a spending perspective, think about what other, more accessible products or services you can offer.
“Now is the time to explore the ways in which you can make your expertise accessible, regardless of people’s budgets.” Chelsea
Now, niching is a big old topic (one for a future F&F article we’re sure), but Chelsea asserts that in terms of business success, it’s not always essential to have your revenue streams niched.
While you can, of course, keep your marketing laser-focused in terms of messaging, you can still have a broad range of offerings in terms of the revenue streams that sit behind it.
Keep pushing your signature offerings – and hopefully, you’ll still be making the majority of your money here. But there’s nothing stopping you from having a more accessible offer for beginners or people who are new to your world.
This allows you to capture people at the beginning of their journey and tailor offerings for each stage of their development. So if people land on your site and can’t commit or aren’t ready for your full top-tier service, there’s something else on offer.
4. Vary your visibility
Is Instagram sapping your energy? Demanding hours of your time and yet you’re seeing little in the way of business results?
It might be time to switch things up.
Chelsea’s next tip centres on how you can vary your marketing output to great effect on social media and beyond.
What she’s found to be the most beneficial approach, is to ensure she is visible to her audience in different ways at different stages of their buying journey – tailoring content, platform and format accordingly.
For example, Chelsea has adapted her content to focus on Pinterest for those ‘pre-beginners’ and beginners in their business journey, changing it up to Instagram for those a little further along.
Look at the data from your social channels – what is it telling you? How can you adapt your content, messaging and timing of posts accordingly? It isn’t about doing more, it’s about adjusting to maximise impact.
And that's not just online marketing! We often forget about offline and local marketing, but massively successful businesses existed before social media. In post-covid times more than ever, local people are seeking connection at a local level.
So now is the perfect time to get in touch with your local network. Is there something happening nearby that you can support or have a presence at?
Why not work from your local coffee shop once a week and try to speak to a couple of people each time? Or pop a flyer up on their noticeboard? Or attend a networking event? And of course - hop along to your next local F&F Hugs and Brunch event!
5. Don’t be afraid to seek a stable income
Chelsea quite rightly notes that this one can be a bit of a taboo topic in the entrepreneurial community. She reiterates that there is absolutely no weakness in seeking some form of stable income to support you and/or your business through a turbulent time.
If you feel you need that short-term (or longer-term) contract or part-time job to ensure some financial stability at the moment – do it! There is no shame – and what’s more, it can be a very sensible move to protect your mental health.
There might be other reasons you choose to seek a more stable income stream – perhaps you’re going for that mortgage, or maybe you’re considering a family soon and are seeking the benefits of a fixed maternity package.
It doesn't make you any less of a business owner to take on a fixed income for a period of time. It just makes you a smart human being to realise you need it. Your business can still thrive – either alongside your other role, or when you’re ready to return to it. What’s more, you’ll be returning to it in a much better place where you’re not overwhelmed by money worries.
Hustle culture is over (thank god). Chelsea’s all for that. She’s here for this new, more sustainable approach to work – where we can all be that little bit more honest about some of the struggles we’re facing.
And quite frankly, so are we.
“We’re all human beings. We always talk about ourselves as female founders and business owners but very rarely do we speak about being human. It’s time that changed. We have to put people – and ourselves – first.”
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