Business

How To Prepare Your Business For Longterm Economic Slowdown

How To Prepare Your Business For Longterm Economic Slowdown

The US inflation rate continues to fly high above the Fed's 2% target, and policy experts predict that the earliest we can expect rate cuts is Q2 of 2024. Meanwhile, the US GDP dipped 2.4% in 2023 and is projected to drop to 1.5% in 2024. This implies that in 2024 and beyond, businesses will continue to deal with the high cost of borrowing and slow growth.

Despite these challenges, businesses that take specific measures to prepare for long-term economic slowdowns may thrive or even exceed growth benchmarks. Let’s learn how.

Tips To Keep Your Business Afloat During Tough Times

1. Manage cash flow

According to John Simmons, managing director at JPMorgan Chase Commercial Banking, businesses must be proactive to prepare for multiple scenarios in the face of a looming economic recession. How you time money flow into and out of your business will make or break your business. Ideally, you want to budget your finances carefully to address the increasing expenses and decreasing revenues.

To manage your business’s cash flow, monitor your cash flow statement daily and begin forecasting (if you haven’t started) for the coming three, six, and twelve months. These will help you anticipate potential cash flow bottlenecks and develop mitigation strategies.

2. Maximize the benefits of volatility

When markets are in flux, businesses need a strategy to deal with whatever is coming. Globally renowned economic expert Rama Variankaval has this to say. “Every downturn transforms more into a buyer’s market, presenting unique investment opportunities for some businesses. Therefore, companies should consider mergers or acquisitions with strategic partners rather than taking an insular approach and missing out on opportunities.

Other long-term investment strategies to make when markets are in flux include riding on the lower equity price wave to buy under-valued assets. Use leverage opportunities to finance your projects or scaling plans.

3. Take care of your customer

Imagine the level of damage that the 2008 recession dealt to small businesses.  Yet, Groupon, an online marketplace for discounted goods and services, was launched in 2008, but by 2010, the company’s revenues topped $760 million. MOD Pizza also launched during the crisis at a time when the rich could afford to eat out. The pizza chain sustained rapid growth during the crisis and opened 442 new restaurants between 2008 and 2019.  

In both cases, their secret to success was putting their customer’s interests first before anything else. Groupon started giving its customers access to great offers, discounts, and cashbacks at a time when customers needed saving the most. On the other hand, Mod Pizza offered an affordable flat rate of $8 to enable its customers to customize their pizzas and salads with different toppings.  

4. Get professional support

You don't have to struggle alone as your business deals with an uncertain future. Many community lending partnerships and CDFIs provide free coaching to businesses on accessing financing and traversing the harsh realities of operating in competitive markets.

 There are also government-affiliated resource centres and nonprofit organizations that lend and coach SMB owners.  The U.S. Small Business Administration keeps a searchable map where entrepreneurs can find help in their area.

Conclusion 

The global economy can move in any direction, which is beyond our control; however, one thing we have control over is preparation. Despite the challenges that a slowing economy brings, how well you prepare will determine whether you emerge weaker or in a solid position after the storm. 

Subscribe to our newsletter to get expert insights
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

Read more about Business

Would you like to share your expertise with our audience?
Write for us
Write for us