When signs of a recession emerge, panic is the first response from many business owners. Battening down the hatches and preparing for an economic slowdown is natural—and often necessary. But a recession also presents a prime opportunity to re-evaluate and reset your business on a path toward future growth.
[caption id="attachment_221995" align="alignright" width="221"] Toby Guinn Sr., Founder & Director of Business Development, Global Merchant Partners
Because the data shows, growth will come again. Between 1854 and 2020, the average U.S. recession lasted 15 months, and U.S. recessions between 1945 and 2020 averaged about 10 months. This recession, too, shall pass.
The objective is to weather this storm while preparing your organization to pivot promptly into growth mode.
How Business Owners Can Emerge from a Recession Stronger than Before
While each business must form a plan that's tailored precisely to its own operations, some recession-specific best practices include:
1. Building Your Cash Reserves
Cash is the grease that keeps the wheels of business churning. You may maximize your cash reserves by:
- Seeking more favorable terms with your lenders
- Prioritizing fulfillment of unpaid invoices— "next week" is not an acceptable answer during a recession
- Switching to more cost-effective subscriptions, services, and products
There is no better time than right now to consider how you can free up more cash flow. Liquidity keeps your business dynamic, allowing you to capitalize when post-recession opportunities arise.
2. Protecting Your Existing Earning Streams
Remember, everything constricts
during a recession, and cash is more difficult to get your hands on. Protecting your reliable sources of cash-in-hand is paramount.
Safeguard your existing revenue streams by diving into your books. Understanding where cash is coming in from and where it is flowing to is the first step in preserving those revenue streams—and eliminating revenue siphons.
You may need to make a call to a valued customer to cement your relationship, or sever ties with a vendor whose prices have become untenable. Do what you must to cement your incoming revenues while eliminating escape routes for your hard-earned cash.
3. Focusing on Your Creditworthiness to Make a Great Impression When You Are Ready to Borrow Again
You may be reluctant to take on more debt right now, and that's fine, because many creditors are tight-fisted.
Take this time to consolidate and pay down your business' liabilities. Get your accounts payable in order, and make your business as attractive as possible. For, when the economic spring comes, lenders loosen their belts, and you're once again ready to borrow in the name of growth.
4. Take a Hard Look at Operating Costs
Cutting truly valuable resources—employees, infrastructure, spheres of operation—is
one of the most short-sighted steps a recession-fearing business owner can take. Instead, focus on where your operating costs are unjustifiably bloated. You can start your cost assessment at the point of sale.
Are you eating credit- and debit-card surcharges each time you sell a product or service? Other business owners are retaining more earnings by using the credit card surcharging model, and you should too.
Solutions to Increase Your Retained Earnings and Position Your Business to Crush the Economic Upturn
While a recession shouldn't paralyze your business, you do want to avoid needless spending. Now is a time to trim the fat that has been sapping your business—inefficiencies that have perhaps been obscured by the glare of blazing revenues.
For many businesses, payment processing fees represent an outsized expense with no real benefit. Global Merchant Partners helps business owners increase gross profits and retain more earnings through smarter payment processing solutions—and we did so throughout the last recession, too.
Contact Global Merchant Partner today for advice on how to remain lean, maximize your cash flow, and prime your business for brighter economic days ahead. Call (302)268-6222 or visit www.globalmerchantpartners.com