2008 started hopeful, but the housing crisis eroded many of our fundamental beliefs in home ownership, small businesses, and some of the financial institutions that were supposed to make the American dream accessible to every American. Understandably, many business owners are bracing themselves for another economic downturn, and even the word “recession” becomes something to be feared instead of something to prepare for.
But like so many things in life, similar circumstances don’t have to produce similar outcomes. We have all learned so much about weathering economic turbulence, and at Stearns Bank, we want to share our thoughts about how businesses can still thrive, even if recession becomes a reality. We’ve broken our strategies down into four tips to make sure your business is well-prepared.
1. Know your numbers
When it comes to owning a business, there are many moving parts — but keeping a close eye on finances is by far the most important. Whether in a recession or not, you should always understand your business’s cash flow, profit margins, inventory, and monthly sales.
Financial advisors recommend keeping one year's expenses in savings in case your sales drop. While this might be a steep number for a struggling small business, a BusinessSmart™ Market Savings Account at Stearns Bank can grow your savings with no start-up fees or minimum balance requirements.
Lastly, examining your finances allows you to cut unnecessary costs. Utilize your account software to monitor incoming and outgoing expenses to see where you can shave off a few extra dollars every month. Even the tiniest changes can add up to big savings for your small business!
2. Communicate with employees
Recessions are a scary time for everyone, employers and employees alike. This is why it’s important to maintain open and honest communication with your team about any upcoming changes and the decisions behind them. The more comfort and support you provide, the more likely you are to avoid the mistake of costly turnovers.
Did you know turnover can cost an employer 33% of an employee’s salary? Finding a replacement for an employee is an expensive occurrence that can have severe implications for your business. Keep employees happy and ahead of the recruiting trends by creating an agile workforce — if possible, allow them to work remotely or supplement work with an independent contractor.
3. Keep investing in your business
No matter the current economic climate, your small business should grow with the world around it. It may seem counterintuitive, but continue to evolve and advertise your small business even when things look unfavorable.
Take Amazon, for example. When the financial crisis of 2008 struck, Amazon leaned into innovation and launched a whole line of products, including Amazon Prime, Amazon Kindle, and AWS. “By 2009, their profits were up 68%, and each product has become a category leader and major profit driver for Amazon.”
4. Be flexible
Flexibility and adaptability are perhaps two of the most important things to remember when preparing your small business for a recession. Change is inevitable, but it’s all about adapting and overcoming those changes that will get you through any turbulent times.
Abi Lokesh, CEO and co-founder of Fracture, described this sentiment by saying, “You can’t be married to any specific strategy, product, or service. You have to be willing to try everything you can, see what works, and pivot accordingly.”
When was the last time you conducted a customer satisfaction survey or examined your top-selling inventory? Instead of relying on “gut feelings, " seek tangible data and customer feedback about the products or services they seek from your business. From there, you can adapt with changes or improvements to focus on what your audience actually wants. Being flexible and focusing on customers’ needs are two of the best things you can do to build up your small business, regardless of the economic climate.
Reach your small business goals with Stearns Bank
At Stearns Bank, we understand all you have gone through as a small business owner to bring your dreams to life. You have been through ups, downs, trials, and triumphs. We understand the unknown is scary, but we’re here to help with business banking that’s simple, smart, and rewarding.
Whether you’re interested in a BusinessSmart™ Checking Account or want to apply for a Small Business Loan, our business banking experts are here to help with personalized customer service, full online banking capabilities, and a live employee answering on the very first ring. Find everything you need to reach your small business goals in one place.