Launching a business can be exciting and exhilarating but you need to plan for every eventuality. Being able to ride out economic uncertainty is critical to long-term success, so recession-proofing your business is essential.
By considering how to protect your company in the event of an economic downturn, you can ensure that a reduction in cash flow won’t prevent you from operating. Similarly, being able to survive even when your turnover takes a temporary dip means you can overcome the leaner months and benefit from times of economic boom.
If you’re launching a new business, now is the perfect time to incorporate some recession-proof processes into your company. When you start recession-proofing your business from the outset, you stand a much better chance of being profitable in the long-term. But how can you ensure your business will stand the test to time? Take a look at some of these sure-fire recession-proof ideas and find out how they can transform your business:
Serve more than one market
When you first come up with an innovative new product or service, you’re probably setting your sights on a specific demographic being your target audience. Perhaps you’re developing a niche product that will serve a particular sector? Maybe you’re offering a luxury service that will only appeal to a portion of consumers?
Having an established target audience is vital, as it helps to streamline your marketing activity and improve your return on investment (ROI). When you focus too heavily on just one demographic, however, your success is reliant on a very small segment of the population. This means that any changes to that demographic could render your business obsolete or inoperable.
When you serve more than one market, however, your company is better protected. If economic changes reduce sales figures in one market, you can rely on alternative markets to carry you through the tough times.
Take the time to consider how your product, service, or brand could appeal to more than one demographic. Often, it only takes minor tweaks to a design for it to become multi-purpose, which means you can easily modify your product or service to attract varying demographics. With minimal investment, you can expand into multiple markets, boost your sales, and recession-proof your business in the process.
Outsource to specialized providers
Traditionally, companies aimed to manage everything in-house. From accounting and bookkeeping to IT and online security; businesses hired full-time staff to facilitate every activity. In today’s climate, however, it makes more financial sense to outsource your needs to agencies, companies, and freelancers.
By doing so, you can streamline your permanent workforce, avoid costly recruitment drives, and minimize your expenditure. It’s increasingly common for new businesses to outsource arguably generic processes, such as accounting or IT services, but you don’t have to stop there.
When you outsource more specialized areas, you can enhance the range of services or products your business offers and appeal to a wider target audience. Of course, the ability to outsource services will depend on the sector you operate in but there are viable options for even the most niche industries and companies.
If you run a law firm that specializes in corporate litigation, for example, why not team up with an attorney who offers company formation services? Bringing in clients who are just starting out will stand you in good stead when they require litigation services in the future and offering a wider range of services will enable you to serve a much broader market.
Alternatively, if you’re setting up a healthcare business, why not offer more advanced clinical procedures? With outsourced continuous EEG monitoring, for example, you can provide exemplary patient care without expanding your staff. This gives you the opportunity to provide patients with the on-going care they need and the reassurance of working with the same medical team while allowing you to increase the number of services your business offers.
Finding ways to streamline your in-house processes and outsource your needs is a sure-fire way to reduce your costs. Furthermore, adding more specialized services via outsourcing gives you the flexibility you need in times of economic uncertainty or upheaval.
Stress-test your business
A stress test is a great way to see exactly how your business would cope in the event of a downturn, crisis, or recession. Designed to analyze what would happen to your company in a range of different scenarios, a comprehensive stress test will tell you exactly how robust your business is and give you the data you need to enhance its survivability.
When devising your stress test, it’s important to ask the right questions, so take the time to assess every element of your organization. Useful issues to address include:
- What demographic is your biggest customer?
- Are you prioritizing shareholders, customers, or employees?
- What is your average customer lifecycle value?
- How would a nationwide drop in income affect your biggest customers?
- What legislation or regulation will affect your business or customers in the next 12 months?
- What is your borrowing capability?
- What performance variables are you tracking?
- How many growth strategies are currently in place?
Crucially, don’t assume you know the answers to any questions on your stress test. As the owner of a business, it’s easy to think you have an intricate knowledge of every aspect of the company. However, it’s important to have verifiable data to back up every answer. This will ensure the accuracy of the information you’re using and highlight any gaps or inconsistencies.
Routinely stress testing your business will help you to identify areas of concern, as well as processes and procedures that are working well. With the information, you can identify the need for additional contingency plans and establish strategies to capitalize on your success and grow your business.
Overcoming Economic Uncertainty as a New Business
It’s tough for established businesses to ride out a recession so it can certainly be tricky for new enterprises to overcome economic downturns. By incorporating a recession-proof strategy into your business plan from the outset, however, you stand the best chance of retaining your profitability in spite of economic uncertainty and achieving long-term success.